Nudging Ukrainian consumers into the age of technology takes a lot of patience and even more persistence, but one Kyiv-based company thinks its virtual store will eventually reap real cash.
The International Center for Information Technologies, a private Kyiv-based computer business, is gambling on the idea that Ukrainian book buffs will soon warm to the idea of buying online.
The computer company started its online service, Bambook.com, to get an edge on the competition in Ukraine’s e-commerce sector – an industry likely to see huge gains if it follows the pattern already seen in the West.
First, however, the center must sit back and wait for its clients to get online – and then it will have to convince customers about the convenience of online buying.
It’s no easy task, and Yelena Chaika, business development manager at the center, understands that profits will be a long time in coming.
‘The virtual store is a long-term investment,’ Chaika said. ‘Right now, it’s not profitable.’
Bambook.com opened in March 1998, but it wasn’t until September 1999 that the center came up with the original name and the current domain, Chaika said. Currently Bambook.com gets about 100 hits each working day. Of those, about 20 to 30 people place an order.
‘Books and computer software are the best sells in a virtual store,’ Chaika said.
When it comes to book selection, gender becomes very important.
‘Because there are more men among our customers, romance books are not popular with buyers,’ Chaika said. ‘The store tried to put romance books on sale last year, but we got little response.’
Career-oriented customers prefer buying specialized literature to brush up on professional skills.
‘Internet surfers are looking, mainly, for literature on PC usage and business management,’ Chaika said.
To get a wide selection of books, the virtual store cooperates with about 100 publishing houses both in Ukraine and abroad. However, there is a scarcity of specialized literature published in Ukraine.
That’s why the store joined the Associates Program with Amazon.com, Inc., in the fall of 1998 to give customers access to books published in the United States.
‘The Ukrainian store’s catalogue includes 100 books from the Amazon.com list,’ Chaika said.
But buyers are not limited to those selections. Ukrainian customers can order any book from the Amazon Web site and pay in hryvna.
In teaming up with Amazon, the bookstore hopes to get a competitive edge on the market because many e-stores are emerging in Ukraine.
‘In a year, Ukraine is likely to experience a boom in e-commerce and Internet expansion,’ said Mike Doudnik, manager of the media Web agency Actis/Armitage.
So far that hasn’t happened. In fact, the lack of people online is the biggest obstacle in Ukraine’s e-commerce industry.
Although estimates vary, it’s clear that only a fraction of the population has access to the Internet.
Yury Bagrin, head of the Internet marketing department at Navigator-Online and editor of the e-magazine Internet Marketing, says it’s tough to get a handle on the accurate statistics on Internet users because marketing research has not been conducted.
‘In my opinion, approximately 1 million people have access to the Internet in Ukraine,’ Bagrin said. Other estimates are more pessimistic.
Sergey Azarov, the state and international relations manager at the Internet service provider Lucky Net, said he estimates the number of users at 300,000.
‘My estimate is based on the assumption that there are about 1,500,000 PCs with Internet features, and every fifth PC is connected to the Internet.’
Besides a lack of Internet users, there is also a deficit of credit card holders in Ukraine, which makes online buying inconvenient.
People are used to paying in cash, and therefore wary of using credit cards.
‘The challenge lies in changing consumers’ paying habits,’ said Evgeny Plotitsa, deputy head of the credit-card division at the bank Aval.
Aval began issuing its own credit cards in October 1996. Currently, Aval has about 83,000 card holders in Ukraine. The bank collaborates with the virtual store enabling its customers to pay online. But many people still resist this method.
‘Only a dozen customers have paid with a credit card because few people possess the electronic signature to code the order’s payment,’ Chaika said.
Gaps in the Ukrainian law complicate credit card payment because there is no legal base to regulate the use of electronic signatures. Therefore, it can be a risky business.
The majority of customers turn to the more traditional way of making a money transfer at the post office. However, it takes about 10 days for a money transfer to be received by the store.
As virtual stores grow, so does their credibility with customers.
‘At the beginning, the customers did not want to pay first,’ Chaika said. ‘They expected a confirmation from the store that it really exists, such as an e-mail or a phone call. Now seven people out of 10 pay without delay.’
Another boost for e-commerce is the willingness of the state-run service Ukrpost to cooperate.
‘We talked the state-run postal service into giving up adhesive paste and brown, ugly wrapping paper,’ Chaika said. ‘The store selected Ukrpost because it delivers parcels both in cities and regional centers.’
Ukrpost plays a vital role in the work of the virtual store because it is people from towns in the middle of nowhere who purchase literature in the virtual store. In general, the virtual store clientele represents a cross-section of Ukrainian population, but customers from small towns prevail.
‘The client base is made up of non-Kyivites,’ Chaika said. ‘Residents of Kyiv or Kharkiv can go to a big bookstore and find a book to their taste. Those who live in rural areas don’t have such an opportunity. That’s why the virtual store can be a solution to their quest for a book.’
