Strikes on Warehouses Change the Map of Ukrainian Retail: Prices May Rise by 5-8%

Russian strikes on warehouses and distribution centers are forcing Ukrainian retail to rethink its traditional logistics model. Instead of large centralized distribution centers, companies will increasingly focus on a network of smaller regional hubs. This could affect not only business costs but also prices and the assortment of goods in different regions of Ukraine.

This was stated in a comment to Delo.ua by retail marketing expert Vladimir Polishchuk.

"The situation with strikes on warehouses and distribution centers leads to a complete restructuring of the entire logistics architecture of retail: from large centralized distribution centers to a more distributed network of hubs. This is not just a 'move to the west,'" comments Vladimir Polishchuk.

According to him, relocating warehouse capacities from central and eastern regions to western Ukraine does not automatically mean an increase in prices for goods in the east or a decrease in the west. Logistics is just one component of the cost price.

"For a large retailer, the more important question is how the additional cost is distributed among the network, the supplier, and the consumer," notes the expert.

He identifies three main options: the retailer can absorb the additional costs with its own margin, the supplier can raise the selling price, or part or all of the additional costs can be passed on to the end consumer.

At the same time, the war can exacerbate existing regional differences in the cost of goods.

The most sensitive goods to transportation cost increases are those with a low cost per unit volume. They take up a lot of space in transport, while the absolute margin per unit of product remains small.

Such categories include water and beverages, dairy products, vegetables and fruits, frozen products, animal feed, paper goods, inexpensive non-food items, and other bulky goods with a low price per kilogram.

"Distance alone does not equate to a proportional increase in price. The truck still has to drive, and the cost of one kilometer is distributed among a large quantity of goods. Moreover, there are logistics online services where one can cooperate with other suppliers and optimize costs," explains Vladimir Polishchuk.

For expensive electronics, cosmetics, alcohol, or premium goods, additional tens or even hundreds of kilometers will have a significantly smaller share in the final price.

Despite the possibility of optimizing transportation, additional logistics costs may reflect on the price. According to the expert's estimate, for certain categories, a price increase of 5-8% is quite realistic.

"An increase of 5-8% is quite realistic. But, of course, this is not a universal figure for everyone," he notes.

For example, if logistics accounted for 5% of the final price of a product, and the costs doubled, theoretically this could add about 5% to the product's cost. At the same time, part of such an increase may be compensated by the retailer or supplier through their own margin.

Large retail chains have more opportunities for such cost absorption, but this does not mean they will do it constantly.

"Large chains will be able to compensate to a significant extent, but whether they want to is another question. This situation will not change positively quickly, and all should be considered in the financial model," says Vladimir Polishchuk.

According to him, a uniform price across the country is convenient for national chains—it simplifies communication, promotions, and price management. However, a differentiated approach may be financially more advantageous. Moreover, some chains already apply different prices depending on the region, and sometimes even within the same city.

Changes in logistics can affect not only prices but also the availability of goods.

"We are already observing this—some goods are disappearing from shelves based on regional criteria. Now is the time for local producers, and they will provide this difference in perception of stores of the same chain in different remote regions," points out the expert.

If the delivery of a certain product becomes too expensive and its turnover is low, it may be more profitable for a business to completely abandon its supplies to a specific region.

"The situation can shift from an increase in price to a lack of supplies. That is, 'the same assortment across Ukraine' will gradually give way to 'regionally optimized assortments,'" predicts Vladimir Polishchuk.

According to the expert, the war will accelerate the transition to a decentralized logistics model.

"This move is inevitable because large warehouses will soon simply not exist. However, I believe that peaceful times will bring us back to a more optimized model of large distribution centers," he notes.

The distributed model is more expensive for businesses. It requires more personnel, warehouse equipment, and duplication of infrastructure, increases internal movements, and complicates inventory management. Additional transportation and IT costs arise.

However, in wartime conditions, the cost of centralization can be significantly higher—particularly due to the risk of losing a large fleet or distribution center.

At the same time, relocating logistics to the west of the country does not fully solve the problem.

"Western Ukraine is also not a 'free haven.' The concentration of warehouses there creates a new risk and simultaneously a shortage of warehouse real estate," the expert points out.

According to his forecast, Ukrainian retail will not just move towards the concentration of warehouses in western regions, but towards the formation of a distributed logistics map of the country.

"We may see not just the relocation of warehouses for events, but a gradual formation of a distributed logistics map of Ukraine, where each major retailer will try to have several independent sources of supply," the expert summarizes.

For consumers, this will mean a gradual increase in the role of local products, greater willingness to replace individual SKUs (Stock Keeping Units), and more active use of online platforms. At the same time, the price difference between regions may increase, but its scale will depend on the specific product category, logistics costs, and who will bear the additional expenses.

It is worth noting that attacks on logistics infrastructure are changing the geography of job vacancies. Under the influence of attacks, their number is also decreasing, and sometimes large networks have to resort to more radical optimization measures.

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