Luxury clothing and footwear in Poland at early stage of development

2010-02-10

Upmarket clothing and footwear sales remain an insignificant part of the clothing and footwear market. This might, however, change in the future, as more upmarket brands are targeting the Polish market.

The Polish luxury clothing and footwear market is fairly small. A number of global brands, such as Dior, Chanel, Gucci, Prada and Louis Vuitton, are absent, and are not sold even in multibrand stores. By way of comparison – many of these can be purchased in Prague, Budapest, Vilnius, Kiev and Moscow.

Purchasing power still too limited
The main reason for this situation is the fact that the purchasing power of Polish consumers is still insufficient to allow them to buy these products, and demand for luxury clothing in Poland is, consequently, limited. People who can afford to buy the most expensive goods often purchase them abroad, whereas in Poland the secondary lines of luxury brands such as casual, sports and jeans, the prices of which are lower than those of premium/luxury items, are the most popular. The value of premium brand products sold in Poland is, therefore, still quite low, as demonstrated by the revenues of the distributors of brands which have decided to enter the Polish market and the retailers operating their stores.
Another reason for the low profile of the upmarket clothing and footwear retailers in Poland is the lack of prestigious locations at which renowned brands can set up shop. One of the main locations for premium brand stores is Trzech Krzyzy Square in Warsaw, where Burberry, Hugo Boss and Ermenegildo Zegna have their outlets, but other Polish cities lack attractive shopping street locations where luxury brands would thrive.
Polish distributors of upmarket brands include the Paradise Group, R&D Poland and OWL International. The Paradise Group represents and opens the boutiques of brands such as Burberry, Hugo Boss, Ermenegildo Zegna and Emporio Armani. R&D Poland and OWL International are members of the R&D Group, which is a Polish distributor of Italian fashion houses (e.g., the Max Mara Fashion Group).



Expansion plans on hold
Some major luxury clothing and footwear retailers are still expected to enter Poland. In recent years it has been reported that Louis Vuitton might open a boutique in the proposed exclusive Bracka department store in Warsaw. However, the economic crisis has prompted many upmarket retailers to postpone their expansion plans.
For example, in 2009 the DKNY brand was to have been brought to Poland by the Paradise Group, but talks were put on hold because of the economic downturn. In addition, the anticipated entrance of Tiffany is to be postponed. According to representatives of the Paradise Group, the crisis has severely affected sales in the upmarket bracket. According to the company, it was the worst year in its history and ended with a loss. As a result, in 2010 the Paradise Group will not open any new stores.
In mid-2009 sales at its Emporio Armani and Hugo Boss stores had suffered a 15% reduction in comparison with the situation a year before. In the case of Hugo Boss, dramatic reductions in sales have been visible all over the world, not only in Poland. A reduction in sales of more than 10% was also experienced by Ermenegildo Zegna’s stores. However, Burberry has turned out to be the brand most resistant to the crisis, both in Poland and globally. As a result of a 20% reduction in sales the Paradise Group has also decided to close stores and withdraw the Max&Co. brand from the market.
Other retailers of premium goods in Poland, including the Powierza Family Company, which offers brands such as Max Mara, Pollini, Francesco Biasia and Coccinelle, ended 2009 with a 15% increase in sales. It opened seven stores during the year and is planning more for 2010.
Furthermore, in 2009 the R&D Group opened the first boutiques of the US Guess brand in Poland. A company representative explained that the Polish market is one of the most promising in Central Europe and that one should secure a good position in advance.
Globally, in 2009 the luxury goods market experienced a 6% reduction in value to €153bn, according to Bain & Company. The industry’s problems were reflected in the bankruptcy of the Christian Lacroix fashion house, and financial problems have also been experienced by Versace, Prada and the Valentino Fashion Group. In 2010 sales of upmarket goods are, however, expected to return to a positive growth rate and increase by 4%.

Patrycja Nalepa
Senior Retail Analyst
PMR Publications