Building blocks to sate DIY demand

They may have been relatively late starters on the retail scene, but building materials hypermarkets are going from strength to strength in Poland.

In 1996, seven years after the economic transformation, the first Leroy Merlin was built in Piaseczno, on the outskirts of Warsaw. It was swiftly followed by Praktiker and Castorama in 1997, and finally OBI in 1998. There are also smaller chains such as Bricomarche, which entered the market in 2000, and Polish Nomi, with 31 stores established in 1993. TTW Dom i Ogród stores were set up in 1994 but the chain no longer exists. Now, Castorama, with its 30 hypermarkets, is the leader in terms of turnover value. Leroy Merlin, with 18 stores, takes second position followed by OBI with 25 outlets and Praktiker's 17. The total number comes to 90.

With the current

According to a Pentor report on the building materials market in Poland, within the last 10 years the condition of the sector mirrored the economic and political situation in the country. After an initial boom, the 'Russian crisis' in the second half of 1998 had a huge impact on Poles' plans to renovate or build their houses or apartments. In 1999, when a tax rebate on building materials was to be liquidated, Polish people started to spend more to take advantage of the tax break while it existed. After a minor recession in 2000, caused by a worsening economic situation, 2004 brought a revival in building and renovating activities, largely connected with EU accession. At the end of 2005 hypermarkets noted another increase in turnover.

The boom of 2005 resulted from the fact that a growing number of Poles started investing in the real-estate market. Mortgage accessibility and the good economic situation encouraged the process. Experts from the National Chamber of Commerce (KIG) estimate that the building sector has made up for its arrears from between 2000 and 2003. In 2005 the number of new apartments grew by five percent and amounted to 114,000.

Tackling local markets

Throughout the last 10 years the needs of Polish customers have changed. The Central Statistical Office (GUS) estimated that before 1996, the average Pole spent zł.44 on DIY a month, so the value of the Polish market was at around zł.4.3 billion. Now, it's up to to zł.18 billion, and the market is shifting. Castorama used to offer only building materials but now the chain is becoming a more decoration-oriented hypermarket.

Weronika Rychlik, a spokesperson for OBI, says that when entering a new market it is important to look at the needs of the local market: "We always introduce the same corporate standards but at the same time we try to adapt our offer and customer service to the traditions and demands of the region."

Christophe Dubus, the president of Leroy Merlin, says that the concept of each store is a local matter and is worked out in Poland. "The ambition of each of our hypermarkets is to prepare an offer that would meet the expectations of the inhabitants living in a given region. Each customer needs to be given a choice. That's why we have opened a gigamarket in Warsaw but also smaller markets, such as the one in Żory," he says.

Growing hunger

Building stores have been evolving since 1996 to match customer demands. In the beginning, customers needed more support, advice and training while shopping and concentrated on foreign brands. After 1999 they became more interested in the quality of products. However, when VAT on building materials increased to 22 percent in 2004, customers saw price as the key factor rather than quality. "Now customers want quality products at a good price and they are becoming more consumption-oriented," Dubus says.

OBI's Rychlik says that in the 1990s Polish customers didn't know what DIY was. "We couldn't compare Poles with Germans, who had been used to such shopping for 20 years. They had to visit a number of small shops that dealt in specific products. It changed quickly and now the customer is more aware of what's on the market. We constantly have to work on our assortment because they can easily get bored," adds Rychlik.

Bright future

All the chains say that they are going to invest further in the Polish market. In two weeks Leroy Merlin is opening a hypermarket in Kraków, then in Gliwice and Rzeszów. "With the dynamic of three, four, or five hypermarkets a year, we are able to guarantee quality," says Leroy Merlin's Dubus. OBI's Rychlik says that this month the chain is opening a hypermarket in Wrocław, then two, in Rybnik and Słupsk, in July. "We want to open a few markets a year in the following years," confirms Rychlik.

The boom for building hypermarkets shows no sign of abating in the near future, and the market for DIY products looks promising. Currently the housing market still needs between 1.5 and three million new apartments, which will need finishing. It is also estimated that around 40 percent of existing apartments need renovating. Young people are leaving the family home earlier, Poles are becoming more mobile, and economic growth and rising wages mean homeowners are inclined towards more frequent interior design and garden changes.