A leading Polish retailer of books and multimedia products is about to expand into Ukraine following the signing of an investment agreement to buy a nationwide chain of bookstores.
Industry insiders say the Ukrainian bookselling market will benefit from the entry of Empik, a subsidiary of publicly traded Warsaw-based NFI Empik Media & Fashion (The EM&F Group), which describes itself as the leading operator of consumer premium brands on the Polish market.
However, according to Ukrainian market players, the Polish company may have to change its approach to local conditions.
Empik signed an agreement in mid-August to buy a 65 percent share in Ukrainian bookseller Bukva, which currently owns 27 bookstores in Ukraine.
EM&F currently consists of 11 trade companies with over 270 retail goods and services outlets operating in two major market segments – media and entertainment, and beauty and fashion.
In addition to Empik, the EM&F Group operates in Poland’s premium clothing brands, such as Hugo Boss, Mango, Zera, Esprit, Mexx and others.
According to a press release by EM&F, Empik will pay $6.38 million for the majority stake in Bukva.
According to Katarzyna Gorecka, a spokesperson for EM&F, the new book stores that will be opened in Ukraine will be based on successful models of Polish Empik.
However, she added, the purchase of the 65 percent stake still needs to be approved by the Antimonopoly Committee of Ukraine.
Gorecka added that her company plans “to restructure” Bukva.
Some industry insiders have said that while the purchase of Bukva by Empik is likely to have a positive formative effect on a struggling and weakly structured Ukrainian book market, they caution that the business risks currently prevalent in the country could pose obstacles to a foreign investor.
Konstantin Klimashenko, the owner of Ukraine’s Knizhny Supermarket network of bookstores, a major competitor of Bukva, said that a number of problems await Empik’s entry onto the Ukrainian book market.
“It looks like the Ukrainian book market is quite promising, since a foreign company is ready to invest its money,” Klimashenko said.
However, he added, the Polish company’s expansion will be fraught with risk.
According to Klimashenko, one of the differences between the Polish and Ukrainian bookselling markets is that 95 percent of the books sold in Poland are published locally and in Polish, while in Ukraine, 80 percent of books sold are Russian-language and imported from Russia.
He said that certain groups in the Ukrainian government have tried to introduce quotas on the number of books imported into Ukraine from abroad.
“If Empik’s managers fail to arrange large imports of books, they will not be able to run such large stores here, the way they are used to doing in Poland.”
Gorecka said Empik’s formula is based on selling a selection of both local and international titles, especially the sale of newspapers, books, music and films.
Another potential difficulty for Empik, according to Klimashenko, is that the Polish company operates a format that differs considerably from the one used by Bukva.
“In Poland, Empik has large bookstores with 500-1,000 square meters of premise space, while Bukva’s stores typically occupy a maximum area of 250 square meters,” Klimashenko said.
He added that with high rents, especially in Kyiv, and the relatively low profitability of the bookselling business in Ukraine in general, Bukva’s new owners will have to adapt their management to local conditions to survive in Ukraine.
Nevertheless, Klimashenko acknowledged that the deal to buy into Bukva would be profitable for Empik, as market conditions will mature in Ukraine, and the value of a chain of Ukrainian bookstores will become incomparably higher than it is now.
“The Poles want to peg the basis for their business in Ukraine to the future,” said Klimashenko.
“When Ukraine eventually enters the WTO, and we have a truly free market, nobody will be able to buy a chain of 27 stores for several million dollars. Such a deal will cost 10 times as much.”
Aleksandra Koval, the president of Publishers Forum, a Kyiv-based civic organization that organizes book fairs and other projects to promote the sale of books in the country, said that the arrival of the Polish bookseller was a promising sign for the Ukrainian book market.
“The Ukrainian bookselling market has still not been formed,” said Koval.
“The arrival of such a successful player as Poland’s Empik will certainly help to improve the structure of the Ukrainian bookselling market.”
According to Koval, Empik has developed an advanced bookselling business model, which has helped them to outperform other players on the Polish book market, with Empik’s sales volumes two to three times higher than those of its competitors.
Among the reasons behind Empik’s success, Koval said, is that the Polish bookseller’s stores combine the sale of their stable goods – books – with other consumer goods like cosmetics, stationery, photographic supplies and multimedia products.
She also said that Empik employs an advanced information system that allows a customer to find a book title quickly based on minimal information.
Koval said that the combination of the mixed sales format and advanced information system attracts more potential buyers than the sale of books alone, adding that book sales under Empik’s business model are easy to monitor, allowing store managers to keep track of which books are in greatest demand.
Empik also continuously organizes public events to promote its goods, including concerts, book presentations and meetings with authors, she said.
“As you know, none of the above is used by Ukrainian bookstores. Now, with the emergence of Empik, such techniques are likely to be introduced in a new-style Bukva.”
According to Knizhny Supermarket’s Klimashenko, in the last few years Bukva has experienced management challenges and difficulties with suppliers.
“Therefore, the Poles will first have to restore solid contacts with some of its suppliers,” Klimashenko said.
“If Empik succeeds in improving the management of Bukva and restores trust in this brand, then the Polish bookselling business will be here for a long time,” he added.
Gorecka described relations with Bukva as “harmonious”.
“We are working with them on developing plans … for the coming years. Once we are ready to present them, we will announce them to the public,” she said.
Bukva was not able to provide respond to Post inquiries by the time the paper went to press on Sep. 13.The number of retail book traders in Ukraine has declined significantly in the last five years. According to the Ukrainian State Statistics Committee, the figure has fallen from 338 companies in 2000 to 236 in 2005, a drop of 30 percent over the period. At the same, profits have quadrupled.
