Top global brands are coming in droves, although continued growth isn’t necessarily guaranteed
While most Europeans are counting their pennies amidst an uncertain economic recovery, many Poles are continuing to purchase luxury watches, fashion from the chicest labels and cars with engines that could power small airplanes. The reason? Confidence in the strength of the Polish economy, which grew in every year during the economic crisis.
The June ICD Research report, entitled “The future of retailing in Poland to 2015” predicts that the luxury, apparel and accessory goods market will be the fastest growing retail market in the country, with a compound annual growth rate (CAGR) of 7.56 percent through 2015. The report surveyed 17 retail channels and 25 product markets within Poland to assess the overall shape of the market over the next four years.
At the beginning of this year, professional services firm KPMG’s advisory service said in a report that Poland’s luxury market was worth at least zł.27 billion and had 500,000 clients.
Luxury cars
Luxury vehicle producers have seen some of the biggest gains recently. Over the first four months of 2011, Porsche sales rose 21 percent year-on-year and Jaguar sales jumped 34 percent y/y, according to daily Rzeczpospolita.
Ferrari, meanwhile, recently launched its first Polish dealership in the same building that used to house the communist party headquarters. That building is now also home to Poland’s Centrum Bankowe-Finansowe and a Mont Blanc outlet.
Rolls Royce and Masarati, moreover, have recently announced that they will soon enter the Polish market.
Clothes and jewelry
Foreign fashion brands Gucci, Sergio Rossi and Yves Saint-Laurent will soon come to Warsaw for the first time, Rzeczpospolita reported in May. They are likely to benefit from Poles’ improved brand awareness, which has grown due to Poles’ increased exposure to new countries over recent years.
Although not well known internationally, W. Kruk has sold jewelry in Poland since 1840. While its watches are not as recognizable as Rolex or Omega, nearly 80 percent of respondents to a KPMG survey knew of the brand and its parent company has been listed on the Warsaw Stock Exchange since 2002.
A Rolex salon opened on Plac Trzech Krzyży last year also sells W. Kruk jewelery, demonstrating that foreign and domestic brands can be partners in the Polish market.
However, there is an uneven presence of foreign luxury brands on the Polish market. While 88 percent of luxury car brands are available in Poland, 53 percent of all top luxury brands are present and only 33 percent of luxury clothing suppliers have opened shop in Poland, according to KPMG. Even so, 70 percent of luxury clothing labels can be bought online and shipped to Poland directly.
No guarantees
Nevertheless, the Polish luxury market is not guaranteed to see strong growth – particularly if the złoty weakens against the major global currencies. KPMG’s survey of luxury suppliers found that one of the biggest barriers to growth would be the volatility of exchange rates, as a weakened złoty would prevent Poles from purchasing top Western European brands.
The Polish government, moreover, could also make tax law more favorable for companies that operate in the luxury segment, KPMG experts say.
“Tax incentives are not available at the moment for companies which incur expenditures on hospitality and entertainment, and this may indirectly curb the growth of the luxury goods market, where purchases are made mostly for hospitality and entertainment purposes,” KPMG tax expert Andrzej Marczak said in a report.
Strong fundamentals
Nevertheless, Poland’s solid fundamentals mean luxury goods retailers can probably count on growth in coming years. Sales of luxury goods are expected to increase alongside the increased earnings of the wealthiest class and the rising purchasing power of Poland’s burgeoning middle class.
And with the International Monetary Fund’s announcement on June 8 that it expects Polish GDP to grow by four percent in 2011, it appears as if top global players can count on a strong economy.
Top brands want to make themselves known to the young Polish market, and while Warsaw still does not have the same opulence as Paris, London or Milan, the Polish market is finally beginning to offer Polish consumers a taste of the high life.
Thomas Kolasa
Źródło: Warsaw Business Journal 12th July 2011