Next normal for Comfy — sales volume drops by 50% and prices may soar by 30%
How one of the biggest business retailers keeps the lights on during the war
Towards the end of May, two months after the Kyiv region was freed from rashists' occupation, home appliances, and electronics store Comfy restored its work in Bucha. It has only been open for 2.5 months before the full-scale war. As early as March, it was partly robbed by the local looters, only to be plundered entirely later by the fleeing ‘orcs.’
Bucha's Comfy became the revitalized store No.79 out of 97 in total owned by the retailer before the 24th of February. The company's CEO Ihor Khyzhniak conducted the outlet opening. To congratulate the team in person, he traveled almost 520 km (the main office is situated in Dnipro).
Mind has interviewed the CEO of one of the biggest retailers in Ukraine and found out the following:
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How the work was recalibrated for the past three months of the war.
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How the company re-establishes the destroyed chains of supply.
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How the market for home appliances and electronics changed.
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Whether to expect the price gouging for the goods in this segment.
CEO in between Dnipro and Cyprus and brief with the President
The news about Russia launching a full-on military incursion reached Ihor Khyzhniak in a Kyiv hotel. Comfy Director-General (DG) arrived at the capital to participate in a meeting with the big business representatives held by the President on the evening of February 23. It ended at around 8 p.m., so the CEO could not make it to the flight to Dnipro, where the head office is.
Besides, the top manager was torn between going to the head office and Cyprus, where he came from to Kyiv. On February 25, there was supposed to be a quarterly Advisory Board in the Cyprus headquarters of Comfy to adopt the strategy for the next 3–5 years and 2022 specifically. Ihor Khyzhniak flew in early to prepare for the upcoming event. Yet, when Russia officially announced the sovereignty of the unlawfully established armed groups of ‘DNR’ and ‘LNR,’ the DG realized that something was about to start... So, he ordered a ticket to the next flight to Ukraine.
On February 24, at about 5:00 a.m., the sounds of explosions outside the window and phone calls woke the CEO in his hotel room in Kyiv. The war has begun. "The first issue was to get to the office somehow, to Dnipro. All the flights were canceled. I tried to search for a car, but it was not easy," tells the interviewee to Mind. Finally, after a strenuous search, the assistant to the DG got her hands on an ex-colleague heading that way in his car. That is how Ihor Khyzhniak managed to arrive at the head office in Dnipro at noon.
First crisis response measures: logistics stall and assets rescue
The top manager stresses that Comfy had contingency plans ready after two challenging years of dealing with COVID and significant restrictions for business. However, he adds miserably that the experience has shown that there is no way to be prepared for the war.
"When this...how to put it... When putin (small letter intended) recognized ‘LNR’ and ‘DNR’ on February 21, I immediately gathered my top team on Zoom. We made our first decisions on supplies to the regions and stores close to the demarcation line to occupied territories", recounts Ihor Khyzhniak.
According to him, the company has decided to rearrange five stores (in Severodonetsk, Lysychansk, Bakhmut, and two in Mariupol) into pick-up points. The retailer had been experimenting with this new format since November 2021 in Kyiv. Stores like these have a small showcase and a few staff workers.
"We tried to reshape the stores in proximity to the risk area into something smaller with regard to assets and the number of employees involved," explains CEO.
The top manager states that the company succeeded in taking some of the goods out. Although, because of a lack of time, not much was implemented from the previously outlined plan. The assets taken from the stores in potentially dangerous areas were distributed to the stores in safer places.
On February 24, Comfy decided to set back the logistics processes throughout the country. It meant getting trucks to turn around and unload cargo in the nearest places, depending on their location at the beginning of the war.
The company decided to keep the head office in Dnipro as there was not much sense in its relocation. The same cannot be said about the central warehouse in Velyka Dymerka village (Brovary district), which remained intact and was transferred to Lviv to minimize risks.
Changes in team communication and 'in-house Arestovych' title
As Ihor Khyzhniak points out, one way to describe adjustments to the work of top management since the full-scale invasion is "prompt decisions and more effective execution of them." As for the substantial changes, they mainly affected the communication with staff rather than control architecture.
"Since day one of the war, just so, I contacted the whole company from the top managers' team to the very last store and warehouse worker. Every day we would share the details about the current situation inside the state and the company, anything we got hold of," DG of Comfy reminisces. "I would tell them that I am there, in Dnipro, in the office and that the company exists and operates."
In the words of the CEO, he is very easy-going with the personnel – any staff member may contact the DG via messenger at any time. Before the war, though, he used to have fewer meetings. Once a quarter, they had personal meetings where the top manager would talk about the company's achievements and plans (in the COVID era, these were conducted online).
Regular sessions with Ihor Khyzhniak were so soothing that staff nicknamed him an 'in-house Arestovych' (ed. Oleksii Arestovych is the adviser to the Head of the Office of the President of Ukraine). The DG caught wind of it. He assures the most important thing at a time of chaos is people and their safety, that is why these calls took place.
"The response was all the same when it began, and I am no exception. For the first half an hour, it is just dismay; you do not know what to do or where to go. But I have this ability to concentrate amidst a crisis, and it seems I have rage and calmness after a while. I was able to think about what to do and how to do it while many others were still in despair," reveals the speaker to Mind.
"For the first couple of online meetings, ten people that manage this company just stood behind my back. That is a whole top managers team. It was crucial for the staff workers. It is like a solid ground that makes you calm down and brings confidence that the situation is under control," explains the CEO. By the way, these sessions happen once a week, not daily as they used to.
Drop of sales volume to 5% and 30% staff cuts
The first few days into the war, the market shrank by 90-95%, observes Ihor Khyzhniak. As of the end of May, home appliances and electronics sales volume is half as much as before February 24. "It also depends largely on the kind of business, region, but generally speaking, it is around 50% in the company and throughout the state", claims the CEO.
The company had to lay off personnel. Comfy had approximately 4,000 employees before the Russian invasion; later, the staff was reduced by about 1/3.
"As a result of hostilities and things like the occupation of certain areas, contraction of the market, etc., we ended up cutting down 30% of the workforce. These are horrible numbers, and it was particularly difficult with the war and uncertainty," says the CEO.
The top manager considers the redundancy decision the hardest and the most painful for him personally. "I am not trying to paint a pretty picture here, so you have to believe me when I say that people are the company's main asset," asserts the CEO.
In addition, more than 180 Comfy workers were mobilized: some on conscription, and others went to the military enlistment office or a territorial defense (TD) unit in the first days of the Russian invasion.
With the network's recovery, the company gradually reinstates laid-off staffers. In April, employment contracts were renewed with 60 workers, and in May, with another 210.
Salary matter and financial aid
Contraction of the market and budget have had a toll on paychecks in Comfy. "It is business. You look at the budget and the cash flow. For instance, top managers did not receive salaries at all in March. That was our call. As of April, we had reduced salary," tells the CEO.
Alongside this, on February 25, the company paid salaries to staff for February plus wages in advance for March. "We had no idea what would happen further with the banking sector. This way, we supported the people making decisions on, for example, migration," recollects Ihor Khyzhniak.
All workers, irrespective of the title, got UAH 10,000 as financial aid for a month. Starting in April, the retailer returned little by little to the motivation system that functioned before the war.
Loss of stores and hunting for looters
Comfy lost seven outlets in occupied and unoccupied territories by the end of May due to hostilities. These are stores in Mariupol (2), Irpin, Melitopol, Kherson, Severodonetsk, Odesa. Some of them are destroyed, some looted.
As explained by Ihor Khyzhniak, much as they would like to resume the operation of the outlets in question, that is going to be complicated. He used Kherson as an example. "Apart from being occupied, we had the store in a Fabrika mall which is now burnt to the ground (ed. rashists bombed the shopping center to dust in early March). So, you realize that even if tomorrow Kherson is no longer occupied, with all the will in the world to restart the work, there is no way to do that. Because there is no location, you would have to rebuild that first. The same goes for Mariupol and already de-occupied Irpin," reasons the CEO.
The speaker also shared peculiar stories with Mind when the team managed to return the loot, arranging a kind of ‘hunt’ for marauders. One comes from the director of Melitopol's store, who has lived in the city all her life and knows everyone. She was lucky to save some critical goods even before the store was robbed. Then, together with a security guard, she watched the video from surveillance cameras and the Internet and identified the thieves.
"Since she knows everyone and Melitopol is a small city, a few phone calls were enough for some of the goods to be returned to the store," recounts the DG. For the ashamed and fearful, a tent was set up to return the stolen goods anonymously.
One more story goes like this: a woman calls our call center and says her husband has run off with three laptops. They have already left the country, and she cannot return them. But she feels uneasy and asks for a credit card number to pay for them. And she does.
Getting back on track and changing communication with customers
The retailer's outlets closed for just a day after the Russian invasion started. Also, on February 24, after lunch, the company turned off all the ads. In the early days of the war, only an online store and a call center worked.
With logistics in the country at a standstill, nobody in Comfy knew when they could deliver goods to customers and thus what range of dates to offer when processing the orders online. Soon, in the CEO’s telling, the team made an inspiring decision, indicating the delivery time as 'shortly after the victory.' The network also supported a flash mob with a Russian ship and its ever-so-obvious direction of movement.
In addition to the Bucha retailer, 79 stores out of 97 the network had before the Russian invasion resumed its work. Still, several outlets in the territory occupied by Russian troops, two stores in Kharkiv, and a few stores near the front line are not in operation.
Comfy began to open literally from the second day of the war at the request of employees who were too anxious to simply sit at home and read the news. On February 25, three stores opened their doors: in Lviv, Uzhgorod, and Izmail. Ihor Khyzhniak admits that at that time, the top management team had no consensus on whether to open or not. Still, they supported the subordinates' initiative. The CEO emphasized that the primary condition was safety.
On February 26, the number of opened outlets increased to 10, as several more stores in Dnipro joined in. "Volunteers were stepping up, and we received first requests from the military, from the TD units for giving out technical devices. And that is how the days went by. Keeping safety a priority, regional managers with the directors on the ground had the final say on where to open. They would get our approval and get the store going," says Mind's interviewee.
Regarding communication with the customers, the DG recalls that in the early days of Russia's invasion, people contacted the company's call center just to talk. Employees did not mind and supported their compatriots.
60 mln UAH for the AFU and devices ‘distribution’ to the military
Comfy and Ihor Khyzhniak himself have been helping the Armed Forces of Ukraine since 2014. In particular, they donate equipment to the military and volunteers and help purchase and repair the vehicles for the front, and support the injured serviceman. "Back then, we met many guys who still defend us, and so the close bond is established," says the CEO.
Since February 24, the company's assistance has significantly expanded. "On the first day of the war, we transferred $1 million (about UAH 30 million) to the NBU's special account, which had just been set up to back the AFU. Three days later, another $1 million was wired to the same special account," the top manager reports.
Thus far, the retailer has also donated goods for more than UAH 20 million for the needs of the AFU, the TD, centers for refugees, displaced persons, hospitals, and orphanages.
"In the first three days, we gave out all the drones we had in the network, in warehouses, somewhere in Lviv, and moved them up here. Tablets for adjusting fire, smartphones, SIM cards, and power banks were needed the most. Then small household appliances, kettles, hair trimmers, washing machines, dryers, and multicookers when people had already begun to move around. Anything to improve the lives of people forced to leave their homes," tells Ihor Khyzhniak.
The transfer of goods occurs quite quickly – sometimes, a few hours pass from request to receipt. The CEO claims it is because Stanislav Ronis, the company's owner, empowered him to make such decisions. "When we talked, we decided that if we withstand, if Ukraine lives, Comfy will too. And if we do not withstand, no one will need those refrigerators, boilers, and drones," he points out.
As for the company's other initiatives for supporting the AFU, the retailer directs 3% of all purchases through a mobile app to the army and transfers amounts from gift cards at customers' request. They even wrote off the bonuses accumulated by customers for the same purpose (which was completely optional).
In addition, the company's employees organized a volunteer kitchen right in the office in Dnipro as a way of helping the coffee house that joined the international project World Central Kitchen.
Logistical challenges and supply chain breakdown
According to Ihor Khyzhniak, the retailer has been dealing with two fundamental problems: an increase in price and added complexity of logistics, and a shortage of goods. These remained true from the beginning of the invasion, throughout the restoration of the network, and to this day.
"Firstly, all the logistics companies have raised prices a lot. Secondly, there is a major shortage of vehicles and drivers. In the early days of the war, finding a car and getting it to Brovary or delivering something from Kramatorsk was a huge problem. Or even from Dnipro, Kryvyi Rih, Kharkiv. Mission impossible. To date, it takes an incredible amount of effort to find transportation that would go there," he explains.
In the first days of the war, recalls the top manager, the vehicle was worth 5–6 times more than before February 24. The price dropped slightly and is still 2-3 times more than before the invasion.
The exact logistics problems exist among vendors and other partners of Comfy, which in turn destroys the established supply chains. Previously, the company planned the volume of goods to be ordered for a year ahead, adjusting it every six months, a quarter, or a month. The volume was apparent in advance so the product could be produced and delivered.
"Unfortunately, all these plans, just all of it is ruined. One may order today and pay, but when the store is actually going to get the items and put them on a shelf is anyone's guess," the CEO reflects with sadness.
Complicating matters further is the fact that very few carriers agree to come to Ukraine these days. In addition, many trucks are now utilized in humanitarian missions. "It is nothing but risks for them, and they say they do not want to accept those risks. They can deliver to the warehouses somewhere in Europe, but from there, it is all on us," says the DG, adding that the company has to put together all these supply chains anew.
Сommodity deficiency and shift in demand
Along with logistics challenges for home appliances and electronics retailers comes the issue of shortage of goods. Accessed on May 25 by Kyiv economics school, 181 warehouses were damaged or destroyed due to hostilities in Ukraine. Comfy DG notes that there are warehouses of network suppliers among the battle-scarred facilities.
"Not many appliances have 'survived' the war in the country. As an official company with clean books, we buy all our goods from within the state, using the DDP system, paying in hryvnias. Right now, purchasing goods from within the country is a massive issue; there are simply none," claims Ihor Khyzhniak.
As reported by the CEO, all digital goods, which have been in high demand since day one of the war, like gadgets, smartphones, tablets, drones, power banks, chargers, and laptops (in some market segments), are in extreme deficit nowadays. Comfy has it pretty good with the latter because the retailer received a fine batch of laptops right before the war.
As for small home appliances, there is already a specific shortage of inexpensive kettles, multicookers, and hair trimmers. The large home appliances segment is short of washing machines and refrigerators, which suppliers are forced to order from China.
In general, the demand has surged for everything needed today at the front, in the TD and the AFU. Also, for the welfare improvement of people forced to leave their homes. Expensive goods have become much less popular. "We do not order premium because it is more about practicality these days. Like a washing machine must wash, some cool features or tuning are of no interest. The first prices, the middle segment is in demand today," explains Mind's respondent.
How are they adjusting the supply situation, and what is new in procurement policy?
Before the war, the retailer purchased the goods from well-known international vendors in Ukraine and the warehouses in the state, leaving the opportunity to restock regularly. They transported little directly. Now, the company is looking into supply options where they would procure in Europe independently. New patterns are under development, reveals Ihor Khyzhniak.
"Day by day, step by step, supplies, logistics schemes, and some arrangements are being restored. We are negotiating with some factories from Türkiye and Europe, setting connections and gradually restoring all supplies. I hope the situation will improve in a month or two," the top manager comments.
At the same time, according to him, the supply chain will not be so time-efficient, increasing by 2-4 times, leading to less flexible purchases and larger lots to order. Mind's interviewee emphasizes that earlier, it was a very scheduled work. Nowadays, the procurement goes like this: a product appears, and so does the opportunity – the company will try to buy it.
"Today, we rejected the deep assortment strategy to avoid problems with the cash flow. Some products are out of reach. We try to take more needful goods so that the business and the financial system could function," adds the CEO.
In his words, Comfy's leading partners and the company itself are searching for solutions for future operation regimes, which warehouses to use for dispatch, and what kind of supply chains would work. That is why the retailer has been negotiating with all suppliers of services and goods these past three months. "Everyone is incurring losses and has their chains of supplies and payments broken. Joining our forces, we are trying to find a win-win solution to unfreeze ties, set deliveries, find goods, etc."
Prices for appliances and electronics may rise by 10-30%
An increase in the price of logistics and fuel, appreciation of the dollar and euro, additional expenses because of non-covered risks, and growing procurement prices have led to costs creeping up for some commodity groups by 3-7% compared to before the war.
The DG predicts that prices for home appliances and electronics in Ukraine will continue to grow because new procurements will be much more expensive.
"It is important to understand that these are old purchases and leftovers. All new purchases will have other prices, exchange rates, and logistics costs. Therefore, I expect an increase of 10 to 20%, maybe up to 30%," says Ihor Khyzhniak.
How losses and damages of the company are estimated
The retailer that was supposed to harmonize strategy, new projects, and plan the revenue growth on February 25 is now quantifying damages. Mere loss of assets, stores, and equipment will net hundreds of million hryvnias.
"Not to mention that it would be proper to count unearned income and consider the company's capitalization. Also, how much it was worth before the war, what perspectives it had for the very same consolidations, and where we are today. So many steps taken backward..."
The DG notes that the company currently has no access to some stores, so it is still impossible to calculate the final sum of losses. Still, it would be safe to say it is more than UAH 200 million.
It is also worth mentioning that Comfy's revenue as of 2020 was estimated at more than UAH 16 billion, and profit amounted to UAH 81 million.
Based on what the retailer closes сash flow gap
Ihor Khyzhniak assures that before the full-scale war, Comfy did not have an unprofitable store for many years. "Efficiency was always a top priority, so we had a nest egg that would come in handy in times of crisis."
Under adversity, the company would soldier on because it had funds, opportunities, and a respective strategy. "In 2008, I think I opened 28 brand-new stores when everything would close due to economic downfall," he recalls.
Ukrainian businesses never had to deal with a large-scale war like this one; logically, the retailer has financial problems. According to the CEO, the company has been spending very carefully from day one of the Russian invasion. Daily they draw up a payment plan and calculate expenses for months in advance so as not to ‘break into’ cash flow. Moreover, it optimizes the structure and tries to strike a bargain to raise credit funds (Comfy's business fell under none of the state programs on concessional lending).
On top of that, the retailer is negotiating discounts with landlords. "We aim towards win-win solutions to allow us to function, open stores, gradually increase our commodity turnover and not incur significant losses. When you have a total of minus 50%, and in some stores minus 70%, it is no place to talk about big rental payments," describes Ihor Khizhniak. He adds that they were able to make a deal with almost everyone.
How refinement of the strategy and company's development budget went
The changes to the investment plan for 2022 are rather radical, confesses the top manager. A company planned to implement many strategic projects: expansion of customer deliveries, advancements in online-platform, mobile app, various ‘back platforms’, and processes. They also intended to set up stores, and in case a new format (Comfy pick-up points) gained success to increase its presence in towns.
"Today, it is off the table. Now it is a budget for survival and stabilization, above all. Further along the line, we will think about our development," reflects Ihor Khyhniak.
Besides forming the budget, the company has already held two strategy sessions. "We are already strategizing, discussing the possibilities of market consolidation and the prospects we have today to increase our share. At the same time, we consider our development and what the end of the year holds for us as well as the following years. We see incredible opportunities there," says Mind's respondent.
Among the projects the company will improve this year and invest in, Ihor Khyzhniak named a mobile app, online work, and customer delivery. The retailer will not open new stores in the coming months. However, they want to continue experimenting with a format of small distribution points (Comfy pick-up points). The CEO considers customer delivery to be a promising and vital direction.
In addition, according to the CEO, the home appliances and electronics retail market will be consolidated, and Comfy plans to take part in it.
Lessons for business and what awaits Ukraine after victory
Ihor Khyzhniak believes the war will teach Ukrainian entrepreneurs to be more flexible and better hold their ground. "Many businesses were debt-ridden and weak in terms of stability. I think the war will make them understand that business must be efficient and adaptable to have a 'cushion' for a rainy day," he asserts.
As for adaptability, remarks the CEO, a business needs to be able to bend with the wind and have a customer focus according to their needs of today. It is crucial to keep in mind how the customer wants to interact with the company and what options are available for it.
The top manager believes that victory awaits Ukraine as well as a great future and that everything will be different in the state. "The main thing is to use all these processes in society, the war. We must be intolerant of corruption, and I hope it will be the case. The price we paid for... This war took so many lives it leaves no place for corruption," he voices hope.
Regarding the economic prospects, Ihor Knyzhniak jokingly presupposes that Ukraine will be swamped with offers on whom to give which city to finance the revitalization. "I think there will be a scramble for Mariupol in a good sense, like who will invest in Mariupol's restoration and all the other war-affected cities. I have no doubts that the investment climate will be favorable and that many investments will be channeled to Ukraine," reckons the DG.
The CEO adds that Comfy will naturally have excellent opportunities with such prognoses. "We will consolidate the market in one way or another, increase our share, set up more than one store as beautiful as the one in Bucha, find new formats, be even closer to the customer, provide them with even more services, opportunities. And everything will be very, very good," he summed up.
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