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AIN.UA » EcosystemNova Poshta: The story of creation of the main express delivery in the country

Nova Poshta: The story of creation of the main express delivery in the country

“I’m 15 minutes late for a meeting with the founders of Nova Poshta, Vyacheslav Klimov and Vladimir Popereshnyuk. Ironically, as for the article telling about the express delivery service. They don’t like delays here.”

“When I went to Stanford for the first time, I attended a lecture on the culture of Silicon Valley,” started a conversation Klimov, who has been trying to travel to California almost every year since 2006. “I remember the story of time the most: you can come to a scheduled meeting 30 minutes earlier. This is normal; you will be given a chair, a table where you can drink coffee, work with your laptop. However, if you are late for a meeting (and in San Francisco it is not difficult – the traffic congestion there is not comparable with the one in Kyiv), this is considered a waste of someone else’s money. Our company operates the same way. In minutes.”

The conversation naturally moves to the topic of time and efficiency – after all, it was thanks to them that Nova Poshta turned into a company of national scale from a private express carrier having 8 employees. In 2016, Nova Poshta carried out more than 110 million deliveries (about a quarter of them for e-commerce), and the revenue of the Nova Posta Group, which, in addition to the company itself, includes another four companies, amounted to UAH 5.6 billion.

The creation of Nova Poshta in 2001 was not preceded by serious market research and traditional business procedures: its founders Vladimir Popereshnyuk and Vyacheslav Klimov had practically no entrepreneurial experience. Nevertheless, they had a desire to meet the client’s needs – to manage his/her understandable, but not yet solved “pain”.

It started with the banal transportation of goods: Vladimir’s family was engaged in the production of confectionery, and the work of the future Nova Poshta partners was to transport sweets from one city to another. At that time, the company competed not with other express deliveries (there weren’t any competitors on the Ukrainian market), but with train conductors and intercity Ikarus bus drivers.

Contrary to the obvious guesswork, the company did not try to compete with Ukrposhta. “Ukrposhta has never been a benchmark for us,” comments Klimov. “The only common thing we have is the word “poshta”. We focused on fast service and high-quality delivery. Therefore, we did not pay attention to them.”

Vyacheslav Klimov

In Ukrposhta AIN.UA was told that they really work with a wider audience. “We provide services to residents of all localities, while our competitors are concentrated in large and medium-sized cities. The cost of sending by Ukrposhta is 30-40% lower than by other postal and logistics companies. Our main competitors are concentrated on the premium segment of express delivery – the next day delivery, but not everyone needs the next day delivery at a high price,” assures Igor Smelyansky, Acting Director General of Ukrposhta. “Nowadays, the main trend is the growth of the e-commerce market. So, with an ever-growing volume, all domestic players of postal and logistics services market will have enough space.”

A little later, Popereshnyuk and Klimov became interested in the indicators of the express delivery market in the US and Europe and realized that in Ukraine this niche is absolutely free, and demand – though it is unconscious – is enormous. Initially, Nova Poshta invested $7,000 (at that time – UAH 15,000-20,000), and, according to Klimov, these were the only money raised to the company from outside (by the way, this was also the savings of the founders’ families)

First problems

Today Nova Poshta has more than 2,300 offices and 23,000 employees (for comparison, Ukrposhta has 11,500 offices and 73,000 employees). Hardly anyone would think that the first NP orders were delivered by partisan methods and often were even unprofitable. The company made a commitment to deliver in 24 hours, which sometimes led to sending a courier to another city by train or hiring trucks for bulky cargo.

Four months after the startup, the company got the first large customer – there was submitted an order for the return of 200 kg of wooden packaging from the smoked fish from the Kyiv pre-trial detention center.

A few years later, Popereshnyuk and Klimov entered the International Business Institute, where they got acquainted with the marketing director of the Mobilochka chain. For a long time the company has become one of the largest customers of Nova Poshta.

The same customer caused the first serious challenges in logistics. For example, at some point the management of Mobilochka demanded to deliver goods to any point in Ukraine before noon. At first, the task seemed impossible, but without such clients, according to Klimov, business could not develop.

Considering that the company has been increasing 30-50% annually over the last 7 years, they have withstood the challenge of Mobilochka. “According to the classics of management, a growth of over 20% for 12 months is a mega stress for the company, we have been working for a long time at the limit of infrastructure. Of course, the system can malfunction from time to time,” explains Klimov, when we ask why there are so many complaints about the service under each post on the pages of the company.

“We set a very high level of expectations. Whereas previously it was enough for a client to guarantee the delivery and the possibility of cargo tracking, now, in addition to delivery, consumers want a lot of additional services: online services for managing a parcel, delivery outside Ukraine, same day delivery, etc.,” adds Vladimir Popereshnyuk.

The company monitors not only the metrics for service quality, but also shares it in open access. “We regularly publish quality indicators on the website of the company. The latest data are as follows:

0.026% 0.003% 96.6% 91.3%
Cargo damage Cargo losses On-time delivery to department On-time home delivery

We also regularly measure the SSI (Service Satisfaction Index) and NPS (Net Promoter Score). Now these indicators are 8 out of 9 (SSI) and 63% (NPS).” NPS data was provided by UMG agency, the study was conducted on request of NP.

In the press service of the postal and logistics operator Meest Express, one of the NP competitors, we were told that practically the same indicators guide them: cargo damage – no more than 0.05%, cargo losses – about 0.01% and on-time delivery – up to 98%. The company declined to comment how many parcels were delivered by Meest Express in 2016.

Nova Poshta in figures

$ 7,000 UAH 5,6 billion > 110 million 23,000 2,300
was invested in Nova Poshta at an early stage the revenue of the Nova Posta group in 2016 parcels were delivered by Nova Poshta in 2016 the number of employees of the company the number of offices of Nova Posta

One of the key decisions having influenced the development of the company is considered to be the creation of the service offices network. “Back then, our colleagues on the market were ironic towards this. They believed that it was enough to open a warehouse at the entrance to the city,” remembers Popereshnyuk. “Nowadays there are about 200 offices in Kyiv. Sometimes, from the window of one office the sign of the other can be seen.” The partners explain that it was done on purpose: if offices are within easy walking distance, delivery will stop being a stress for а client.

The founders of the company tell: for the first ten years they were the main force of strategic decisions, but now the vector is shifting towards management.

“We are still ideologists, authors of many market and technological ideas. This is as it should be. The history of the world’s successful businesses proves it,” explains the state of affairs Klimov, “No matter how competent a manager is, you need someone who can generate even an absurd idea and be its driver.”

Today, many large-scale changes in the company occur without deep involvement of the founders. “The mobile application project was implemented exclusively by management, the creation of the National Terminal is entirely the idea of our directors and their teams,” lists Popereshnyuk, noting that the National Terminal is the largest investment in the history of the company.

“At the same time, we, as concerned owners, can get involved in making solutions that, at first glance, seem very tactical. For example, we participated in the selection of design jackets for drivers. It seems that this is a tactic, but this is a great decision and we want to participate in it,” boasts Klimov.

Crisis and rebranding

In 2005, Nova Posta felt the consequences of a real competition – several companies dealing with express delivery entered the market. Perhaps Mist Express was the most noticeable. They had foreign investment and Western technology.

It became more difficult to fight not only for customers, but also for own employees. Klimov admits (however, without naming specific companies): one of the newly-made competitors started offering to the employees of Nova Poshta the salaries 3-4 times higher than their current ones. The management had to invent new methods of encouragement: the drivers were offered piecework pay, which depended on the number of parcels delivered.

The financial crisis of 2008 ruined the turnover of Nova Posta by 30%. But it turned out that you can also benefit from the crisis. While the company’s competitors cut spending on development, Nova Poshta invested in marketing and hiring sales managers. For several months the company stopped earning money, but already in December 2008 it showed growth again.

The crisis was not the only time when the company had to react to damage from outside.

In 2014, due to the annexation of the Crimea and military operations in Donbass, Klimov and Popereshnyuk lost 15% of their business in Ukraine.

However, soon the losses were compensated as the company entered the market of Georgia and Moldova. At the same time, the Humanitarian Mail of Ukraine was launched. The initiative has made it possible to close the demand for the delivery of humanitarian aid to the front-line zone. The company works with more than 150 volunteer organizations. During the whole existence of the program, together with these organizations, it delivered more than 13,000 tons of humanitarian cargo free of charge. The program exists today.

At that time, they conducted a large-scale rebranding – NP acquired a new logo, packaging and other visual identity elements. We trusted the work to be done by the Kyiv branding agency Fedoriv. Andrey Fedoriv, Head of the agency, said, “In May 2014 only visible identity elements were shown at the presentation, the whole rebranding program lasted several years.”

“We started working with NP in the summer of 2013. They addressed to us to get an advertising campaign. We suggested that we postpone this task and first rebrand the company. They had a good product, but the brand did not match,” remembers Andrey Fedoriv. “The owners accepted the offer, but with one condition – they forbade changing the company’s current logo.”

The strategists of Fedoriv conducted research and proposed an idea about the delivery of the future. Klimov and Popereshnyuk liked the idea and approved it right at the meeting. The only hitch remained with the logo: it depicted a wax seal, which did not match the image of a dynamic company that never sleeps. In the period from May to October 2014, the company completely “changed”.

Fedoriv said that his agency has been working with NP so far. Now there are several projects in work, including those related to communication within the company and further development strategy.

Working with the negative

In the autumn of 2016, Nova Poshta faced a problem: the percentage of complaints about parcels delivery delays and quality of service has increased many-fold. That is around the same time the company launched a delivery service from China. “We faced incredible operational difficulties. These were different cargoes, different customers who did not expect that the delivery of Chinese parcels would be executed by Nova Poshta. In addition, Nova Poshta accustomed clients to the next day deliveries. And our audience was not ready to wait three weeks, even if it was about sending out packages from China,” comments Klimov.

“We, as the executors of the Last mile in Ukraine, could not influence the processes of transportation of goods on the territory of China, it was carried out by SF Express, our local partner,” recalls Liliya Zagrebelnaya, PR-director of Nova Poshta. She says that the problems were also related to the translation of addresses and often they had to call customers in order to clarify the details. It took a lot of time.

The number of requests, multiplied by the size of the company, provoked changes in the work of the remote customer service department. Today responses are received through all channels: in offices, through the site, the contact center, comments or messages in social networks. “All requests are recorded in CRM. The system allows recording the history of communication with each client. Therefore, when we receive calls, an operator already looks through previous conversations. Moreover, since recently, he/she deals with the client’s issue on his/her own – finds out the circumstances of the address, contacts the right people in the company, keeps in touch with the client,” said Liliya Zagrebelnaya, PR-director.

Sometimes, curious incidents take place in call centers, in the company they become its own folklore. One of these stories occurred last year in December. The client wanted to know the status of her package – her daughter’s New Year gift. The girl was curious who her mother was talking to on the phone, and she answered that she was talking to the Snow Maiden about the gift from Grandfather Frost. The daughter snatched the phone from her mother and the contact center operator had to play the role of the Snow Maiden and sing the song.

Innovations

In 2016, the company was on the 1,428 place in the ranking of the top-5000 fastest growing European companies compiled by Inc. magazine.

“Today, Nova Poshta Company is pulling up several related industries, for example, we work with our other client – OLX,” told AIN.UA. Andrei Fedoriv, the marketing expert. “A huge number of e-commerce companies, small and medium-sized businesses in Ukraine also develop because we have good logistics in our country. This is especially noticeable in comparison with projects in other countries, for example, in Kazakhstan or Uzbekistan.”

Ivan Portnoy, Head of the marketplace Prom.ua, also agrees with him. His company unites 720,000 internet entrepreneurs selling 89 million goods and services. 74% of marketplace transactions are made by commercial delivery services, although it is impossible to calculate how many of them were made by Nova Posta.

“For example, in Belarus online stores have to build their own logistics, because in this country there are almost no commercial delivery services and courier services cannot accept payment for purchases instead of store employees. This leads to an increase in the cost of Internet shopping for the end user and hinders the development of the e-commerce market as a whole,” comments Ivan Portnoy, Head of the marketplace Prom.ua. “It is not profitable for small and medium-sized businesses in Ukraine to create their own delivery services and have staff couriers. It’s much more profitable to use logistics services.”

In such conditions, the aspiration of Nova Poshta to introduce innovations is understandable. In this regard, they have role models. For example, Amazon, one of the most prominent players in express delivery, is nowadays called the most innovative company in the world thanks to the introduction of robots in logistics, use of drones, automation of product labeling, online services, etc.

“We still do not shoot our own series, like Amazon Studios does, but we are increasingly looking for solutions to our problems in technology. In early 2018, in area of the Circular road in Kyiv the National Terminal will be launched. The total area of the first stage alone is 15,000 square meters, and, according to preliminary estimations, this will allow processing 600 trucks and sorting over 400,000 barcodes of goods per day,” Popereshnyuk introduces the idea.

After a full launch, the terminal will sort cargo at a speed of 4 m/s, which is the equivalent of 14.4 km/h. For comparison: conventional sorting belt operates at a speed of 0.7 m/s or 2.52 km/h. Later, it is planned to open such sorting centers in another seven Ukrainian cities.

“At the National Terminal “Nova Poshta” there is a scanner, which scans a parcel on six sides. Wherever a barcode is glued, it will be read. If this were done manually, the operation would be 10 times slower. It can be recalculated in minutes or money,” Klimov comments, telling that two divisions are responsible for innovations in Nova Poshta. These are the Department of product development and management and the Department of research & development, in total they employ more than 25 people.

The company did not avoid the administrative digital trends like agile (when the development of new processes is split into small phases) and customer journey (when the full customer journey that is being made when making a purchase or using the service is formed) in the development of new services and products. This was the start of the NP Shopping service, which allows you to order products in online stores in the US and Europe. And if in January of that year, at the launch stage, 5,000 orders were processed, in September their number was already 25,000. In 2016 the company delivered more than 110 million packages, about a quarter of this volume is the deliveries for the customers of the e-commerce segment. Ukrposhta sent 18.5 million parcels the same year.

So far, Nova Poshta cannot boast of total robotization (like Amazon), but the first achievements are already done: for example, National Aviation University has developed for Nova Poshta an unmanned vehicle capable of carrying loads of up to 4 kg. The development of an unmanned vehicle for the large loads transportation (from 500 kg to 1 ton) is in the planning stage.

Innovations also encompass sorting of packages. The system Put to Light operates for international parcels. Earlier the sorter needed to read the marking and only then send cargo further along the chain. Now you just need to scan the parcel, then the system Put to Light turn on signals for the sorters, these signals facilitate the process and eliminate errors in the coordination of the cargos.

If we compare the firsthalf of 2017 with the first half of 2016, the number of operations with goods that NP Logistics carried out has increased by 2.6 times. However, the company notes a market deficiency of space. Today, about 300,000 square meters are used for fulfillment in Ukraine, with the exception of warehouses for food offline retail. The company believes this rate to be insufficient, given the annual e-commerce growth rate of 30-50%. “The vacancy of warehouse space in Ukraine now stands about 10%, while there are very few high-quality A class facilities (these are exactly what are needed for fulfillment),” concluded Lisovets.

Recently, Nova Poshta has entered into a cooperation agreement with DPD Group, the second-largest network for the parcels delivery in Europe. This means that in the coming year more than 2,300 departments of Nova Poshta will be integrated with the DPD network (which is more than 28,000 points across Europe).

Figuratively speaking, parents will be able to send a gift to their daughter from the Nova Poshta department No. 1 in Borispol, and she will receive a parcel at the DPD department No. 375 in Brussels.

Klimov and Popereshnyuk are sure that there are no trends that would not be available to Ukraine. The three main directions for the development of express deliveries in the company are: self-service, 24/7 service and digitalization.

Regarding the first one, the company has already started the development of the packstations network. Self-service zones on the basis of packstations have already been accommodated in 15 offices in Kyiv. The company plans to develop their own network in shopping malls, business centers and supermarkets.

One of the closest competitors of Nova Poshta Company – postal and logistics operator Meest Express – is also actively developing the direction of self-service. In October 2017, the Company launched an order delivery program from Ukrainian online stores – Meest Tochka. The service implies that any store, cafe, hairdressing salon or gas station, which joined the program, can serve as an issue point.

“The main task is to minimize human participation in the process. All actions are performed via the recipient’s smartphone. Meest Tochka operators do not even take part in sending in some cases,” was told AIN.UA in the press service of Meest Express.

Now, 114 participants have joined the project, 51 “points” in a dozen cities of Ukraine have been fully launched. At the first stage, Meest Express plans to attract 1,500 participants across the country.

“In Ukrposhta the advantages of commercial services are considered as the possibility of being more flexible, offering significant discounts and working with foreign private postal operators. Ukrposhta, as a state-owned company, does not have such opportunities yet,” Smelyanskiy summed up.

“Customers want the delivery to be mobile and flexible, so communication will become more digital and more contactless. You can manage the package in the mobile application Nova Poshta and receive it via packstation at any convenient time without the help of operators. In the coming years, these services will become more popular than the traditional visit to the office,” Vyacheslav Klimov says.

Since November 2017, you can change the data of recipient, sender and payer through the application. In addition, they added a possibility of registration for business customers (private entrepreneurs, online stores). Previously this option was available only for individuals.

Photos in the article by: Alexander Kozachenko

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