Price advantage of Ukrainian furniture will remain
In the stories of several representatives of companies that have significant export achievements, the problem has begun to become more and more alarming, it has become industry-wide. This is the problem of the outflow of workers from furniture production, and hence the shortage of qualified personnel, which is becoming a brake for building up their export potential by furniture companies. She sounded in the story about the foreign economic activity of LLC Starokonstantinovskaya Furniture Factory, which we heard from its leader Konstantin Demid.
Strokostyantinivski furniture makers began to make their first attempts to sell their products outside Ukraine recently – about three years ago. The means to attract attention to their products was chosen, one might say, traditional, affordable and quite effective – they were demonstrated at industry exhibitions. One large German company emerged as the first potential customer, but such luck was not long-lasting, because it quickly became clear that in reality it was ghostly luck: such price conditions were set, the factory would have to work at a loss. Such an export would lead to bankruptcy.
The conditions proposed by the next Latvian client turned out to be acceptable for the factory, and from the moment an agreement was concluded with it (it was a small furniture store chain), the export history of the Starokonstantinovskaya company actually began. Latvians took for sale a fairly wide range of furniture for the home, which furniture manufacturers could offer Starokonstantinovsky. They were fully satisfied with them: design, quality, and contractual terms. Not satisfied only with the work of Ukrainian customs. Its bureaucratization and formality. This is so “annoying” for the Latvians that they were forced to switch to the purchase of Polish furniture, getting rid of any customs barriers, especially such as Ukrainian ones, within the framework of a single European economic area.
– Has the customs situation not improved with the change of presidential power?
– It can be said that, unfortunately, it has not significantly improved. A significant number of bureaucratic and other incomprehensible customs procedures continue to complicate the business of both furniture exporters and importers, worsening their relations with European customers and partners, for whom in such conditions it is much more comfortable to work with Polish manufacturers within the same economic zone. But it should be noted that the situation in the banking system has improved – with the entry into force of the law “On Currency and Foreign Exchange Operations.” After all, now we are not obliged to sell 100% of foreign exchange earnings, therefore, we can use these funds to a greater extent to purchase imported raw materials.
On the whole, Ukrainian manages to compete with Polish furniture makers at a predominantly low price for their products, which in turn can be formed due to the low level of Ukrainian wages. But this advantage starts to get lost. Konstantin Demid argues this trend, based on the realities characteristic of their company:
– Ukrainians massively leave the homeland. This greatly exacerbates the problem of personnel, especially qualified ones. So that our factory does not become a victim of such emigration, we will have to raise wages to our employees at least to the Polish level, which, of course, will make our products more expensive, and it can stop competing with the Polish one, cease to be attractive for EU countries, buyers from which if they put up with Ukrainian customs inconveniences, it was only because they could buy Ukrainian furniture cheaper than those produced in EU countries. So, developing the export of mass-marketing products in such conditions will become almost impossible or incredibly difficult. There is a dilemma: either not to raise the salary of your employees and lose professionals, or to raise – and lose foreign customers who are interested in our products due to its price. Between these two conditions and have to look for a compromise.
– A little optimism in your words …
“Perhaps so, but the prospect is not so hopeless.” Polish furniture makers are now also faced with the need to raise wages at their enterprises, so that as a result, their level of raised wages will again be higher than our raised level. That is, the price advantage of Ukrainian furniture still remains. This is hope.
The heading “Success Stories” was founded in the framework of a grant project with the support of the Swiss Cooperation Office in Ukraine, the project name: “Increasing the level of cooperation and trust with joint participation in international and national government procurement” – TENDER TOGETHER.