How to spend it in Poland

By bne IntelliNews September 7, 2011

Jaroslaw Adamowski in Warsaw -

With Polish consumers developing a taste for luxury goods, a growing number of premium brands are eyeing an expansion into this rapidly growing market.

Between 2005 and 2010, Poland's luxury goods market grew by 50% to PLN3.5bn (€833m), exceeding the growth rate not only of all the major EU member states, but also of Russia, Turkey and the US, according to a recent report from Euromonitor International. And the nation's appetite for luxury is only set to grow; Citibank forecasts Poland's GDP will rise by 3.8% in 2011, far higher than the desultory growth expected in Western Europe and the US.

Presently, there are about 620,000 potential luxury brands customers in Poland. This category includes individuals whose monthly income averaged €3,750 in 2010, according to data from KPMG consultancy. "Poland's luxury goods market is expanding at a steady pace," says Tomasz Wisniewski, a partner at KPMG Poland. "It's an important indicator of the improving quality of life of Poles who often begin to enjoy their life to the fullest and taste luxury after... years of hard work."

And there is an increasing number of tastes to choose from. Last year, 61% of world-renowned luxury brands were available to Polish consumers, a rise of eight points over 2009, as shown by figures from KPMG. But there is still room for growth, as many major players are still absent from the local market. This includes LVMH, the global leader in luxury goods, which is rumoured to be planning to open up a flagship Louis Vuitton store in Warsaw.

However, some analysts warn that the Polish market may not be ready yet for such heavyweight players, as most Poles still prefer to shop at malls that are generally avoided by premium brands, and the country has few luxury shopping streets. "Most luxury brands are not interested in opening their stores at shopping centres," says Anna Bartoszewicz-Wnuk, director of market research and public relations department at Jones Lang LaSalle Poland. "The fact that Poland's shopping landscape is dominated by malls is a major handicap to the development of the luxury goods market."

Compared to other regional capitals, such as Prague or Budapest, Warsaw's luxury retail offer is still quite meagre, Bartoszewicz-Wnuk notes.

LVMH's main competitor on the global luxury goods scene, Pinault-Printemps-Redoute, has decided to take the plunge though, announcing plans to launch Warsaw's version of London's Harrod's department store, Wolf Bracka, which will open this year. The group is the world's second-largest player in the luxury market, owning Gucci, Alexander McQueen and Yves Saint Laurent in its brand portfolio.

Poland's Paradise Group, which franchises Burberry, Emporio Armani, Hugo Boss, Ermenegildo Zegna and Church's stores, is also continuing its expansion in the luxury goods market and plans to open new stores. The group's owner Jerzy Mazgaj is also a major player in the gourmet food market. Along with the country's growing appetite for Parma ham and creamy Camembert cheese, his Alma delicatessen chain dominates Poland's food sales. In 2010, Alma reported revenues of PLN1.245bn (€296.5m), up 23.3% over 2009, and a net profit of PLN26.5m (€6.3m), a big turnaround from the PLN49.4m loss posted a year earlier.

Driven to luxury

Besides fashion and food, cars are the other major luxury item. "Over the past few years, we have been witnessing a steady growth of luxury vehicle sales in Poland," says Dariusz Balcerzyk, an analyst for the automotive market research institute Samar.

In 2010, luxury passenger cars represented only 2.7% of the Polish vehicle market, according to data from Samar. This means that only slightly over 9,000 of the total of 333,539 sold cars fell into that category.

However, almost every luxury brand managed to improve its sales last year. Jaguar sold 137 vehicles, up 26.9% over 2009, Infinti sales were up 87.2% to 264 units, and Porsche sold 567 cars, up 76.6%. Data from the Polish Automotive Industry Association (PZPM) showed Land Rover growing its sales 38.5%.

Other established brands, such as Mercedes, BMW and Audi, are eager to grab a share of this growing luxury car market, but they target most of their models to higher middle-class customers, according to Balcerzyk. "There is a sub-segment within the luxury segment, super-luxury car brands, which has been developing even faster. This includes Ferrari, Porsche or Bentley," Balcerzyk says.

Ferrari opened its first Polish sales outlet, located in the former headquarters of the communist-era Polish Unified Workers' Party, in October 2010. Granturismo Italia, which represents the brand in Poland, is unwilling to provide exact figures on how many cars have rolled out of its Warsaw store since its opening, but said it sells several units per month - not bad, given that the most affordable model costs €211,000. "Ferrari's rising sales indicate that more and more luxury brands will be expanding to Poland. Their sales will always represent a niche, but a very profitable one," Balcerzyk says.

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