Coming to town
After being ignored for three years by hypermarket operators who branched out across Poland, the nation's second-largest city, ŁodĽ, is finally attracting the attentions - and investments - of large foreign retailers.
Hypermarket operators such as Selgros, Casino and Metro are opening outlets in ŁodĽ, marking what could be a second wave of retail investment into second-tier cities around the country.
This is good news for a city whose outdated industry, high unemployment and low income levels have until now discouraged such investment. For others, though, such as small shop openers and the few hypermarkets that did come here earlier, it means a new period of more vigorous competition.
"When we came here, there was no competition," said Marcin Stolański, chief of the non-food sector in Carrefour's ŁodĽ store. "Now there is going to be big competition."
Selgros opened its "cash and carry"-style center on June 15 on ŁodĽ's east side. The zł. 65-zł. 75 million ($16.3 million-$18.7 million) investment is Selgros' first in ŁodĽ and fourth in Poland, said Łukasz Mikołajczak, a marketing specialist at Poznań-based Selgros. The firm's other locations are in Warsaw and Wrocław, with a fifth to open in Szczecin by the end of the year, he added.
Metro will open the doors to its Centrum M1 retail center ŁodĽ in the third quarter of this year, said Renata Juszkiewicz, a company spokeswoman. The 50,000 square-meter center will be Metro's second investment in ŁodĽ, after having already opened a Praktiker d.i.y. shop. Centrum M1 will have about 50 separate shops and will be located on the city's northeast side.
Casino has chosen ŁodĽ as one of the first three sites for its Leader Brand supermarkets. The firm plans to roll out 30 of these stores by the end of 2000. Casino is also going to put a new Geant hypermarket in ŁodĽ by the end of the year.
This flurry of openings in the coming months stands in stark contrast to last two years, when ŁodĽ was a relative backwater on the hypermarkets' expansion map, sector analysts said.
"The modern mass market retailers (foreign hyper- and super markets) started out with the richer cities: Warsaw, Gdańsk and the Tri-City area and Krakow, for example. When the market is covered in the more attractive cities, they start going in the second rank cities with lower income," said Grzegorz Ejchart, a project manager at market research firm CAL Company Assistance. But he doesn't believe that there's a huge distinction between the first round of investment and this filling out of other cities. Rather it's all part of a stream of continuing retail investment.
"I wouldn't call it a second wave, it's rather a continuation of the first wave" of foreign retail investment, Ejchart said. "Unfortunately ŁodĽ is poorer compared to Warsaw, Poznań, Silesia, Krakow and Gdańsk," so it is only now that foreign retail investment starts to pick up there.
The growing investor interest in ŁodĽ may benefit the city's reputation and provide consumers with a modern shopping experience, but another local group is not so pleased with the new hypermarkets. As in every other city visited by the retail giants, ŁodĽ's small shopkeepers are reacting to the growing number of foreign-owned hypermarkets with anger and dejection.
"Hypermarkets are destroying our retail trade," said Krzysztof Gołzbiowski, co-owner of a grocery store Sabayon, on ulica Traugutta in central ŁodĽ. He estimates that he has lost 30% of his customers to the hypermarkets, a number echoed by other small shopkeepers interviewed.
"Interest in our shop is especially lower on Fridays and Saturdays," said Aniela Bejm, the manager of PHU Pamir grocery store on ulica Zielona in central ŁodĽ. "We have lost about 30% of our clients. Nothing will save the small shops."
Jadwiga Grandys, a sales clerk at another grocery store on ulica Zielona, said that her shop has seen a 50% drop in the number of customers since the hypermarkets began opening.
"The small shops are collapsing, and nothing is going to stop it," Grandys said.
Shop keepers were unanimous in calling for some limits on the expansion of foreign-owned hypermarkets in ŁodĽ.
"Poland for the Poles, right?" Gołzbiewski said. "I don't have anything against foreigners, but there should be equal rights for small shops and the hypermarkets." All the shopkeepers interviewed said that tax breaks hypermarkets receive constitute unfair competition and are the main reason that small shops cannot compete with them. "The situation is hopeless," Grandys said. ŁodĽ city officials were unavailable to comment on the issue.
Changing view
But the situation is far from hopeless for those who have hoped to see land on the investment destination map. That wasn't the case until recently when ŁodĽ took a backseat to smaller, albeit richer, cities. Before the recent attention, ŁodĽ had only two hypermarkets, Carrefour and Leclerc, compared to Warsaw's nine, Katowice's five and Krakow's four, according to a CAL Company Assistance report.
Carrefour was the first hypermarket to set up in ŁodĽ. "Now the competition is following us," Stolański said.
Carrefour's management in France chose ŁodĽ for its first location in Poland because with more than 800,000 inhabitants it is the most populous city after Warsaw and because of the lack of competition, Stolański said. When Carrefour opened its doors here on the south side of ŁodĽ, the only other big foreign market in town was Makro Cash & Carry, which is not considered a competitor by Carrefour because it is a "cash and carry" outfit selling only to business customers, Stolański said. "Now we will have a lot of competition," he added. "There will be fewer clients."
Although it was first into ŁodĽ, Carrefour was a bit late into the Polish market. When it set up its first store in late 1997, Auchan, Casino, Hit and Leclerc already had hypermarkets up and running elsewhere in Poland. With all the new competition, Carrefour will have to change its strategy to continue to draw customers from across the city, Stolański said. "We will be doing special promotions to attract clients," including giving rebates on new appliances when customers bring in their old freezers or washing machines, he added.
And in the face of increasing competition, Carrefour knows how to fight fire with fire: it will open a second, larger store in ŁodĽ next year on land it has already purchased from private owners on the city's northwest side, Stolański said. The second location will have a sales area of about 10,000 square meters, compared to the first store's just less than 9,000 square meter sales area, Stolański said.
Carrefour is hoping that its early arrival on the ŁodĽ market will give it an advantage against the new players crowding the stage, Stolański said. The company has already adapted its strategy to the local conditions in several ways.
"ŁodĽ is a special city," Stolański said. Carrefour pursues a different pricing policy in ŁodĽ than at its locations in Warsaw and Krakow, competing with lower prices to account for the lower average incomes in ŁodĽ, Stolański said.
The hypermarket has also taken a different sourcing strategy in ŁodĽ, Stolański said.
"At the beginning we imported everything from France. But ŁodĽ is a major center for the textile industry, so now we source some of our textiles locally," Stolański said.
Carrefour is using the expertise it gained opening its first store in ŁodĽ to fuel its expansion in the rest of Poland. It will open a third market in Warsaw this year, as well as locations in Wrocław and Katowice before the end of the year, Stolański said. Next year the chain will expand to Czzstochowa, Gdańsk and Szczecin, Stolański said.
Carrefour has not seen a decrease in customers yet, Stolański said, but the new hypermarkets have not yet opened. "Of course when a hypermarket opens on the other side of ŁodĽ, customers who live over there will probably chose to go there instead," Stolański said. "The big problem is what will happen in the future."
Hypermarket operators such as Selgros, Casino and Metro are opening outlets in ŁodĽ, marking what could be a second wave of retail investment into second-tier cities around the country.
This is good news for a city whose outdated industry, high unemployment and low income levels have until now discouraged such investment. For others, though, such as small shop openers and the few hypermarkets that did come here earlier, it means a new period of more vigorous competition.
"When we came here, there was no competition," said Marcin Stolański, chief of the non-food sector in Carrefour's ŁodĽ store. "Now there is going to be big competition."
Selgros opened its "cash and carry"-style center on June 15 on ŁodĽ's east side. The zł. 65-zł. 75 million ($16.3 million-$18.7 million) investment is Selgros' first in ŁodĽ and fourth in Poland, said Łukasz Mikołajczak, a marketing specialist at Poznań-based Selgros. The firm's other locations are in Warsaw and Wrocław, with a fifth to open in Szczecin by the end of the year, he added.
Metro will open the doors to its Centrum M1 retail center ŁodĽ in the third quarter of this year, said Renata Juszkiewicz, a company spokeswoman. The 50,000 square-meter center will be Metro's second investment in ŁodĽ, after having already opened a Praktiker d.i.y. shop. Centrum M1 will have about 50 separate shops and will be located on the city's northeast side.
Casino has chosen ŁodĽ as one of the first three sites for its Leader Brand supermarkets. The firm plans to roll out 30 of these stores by the end of 2000. Casino is also going to put a new Geant hypermarket in ŁodĽ by the end of the year.
This flurry of openings in the coming months stands in stark contrast to last two years, when ŁodĽ was a relative backwater on the hypermarkets' expansion map, sector analysts said.
"The modern mass market retailers (foreign hyper- and super markets) started out with the richer cities: Warsaw, Gdańsk and the Tri-City area and Krakow, for example. When the market is covered in the more attractive cities, they start going in the second rank cities with lower income," said Grzegorz Ejchart, a project manager at market research firm CAL Company Assistance. But he doesn't believe that there's a huge distinction between the first round of investment and this filling out of other cities. Rather it's all part of a stream of continuing retail investment.
"I wouldn't call it a second wave, it's rather a continuation of the first wave" of foreign retail investment, Ejchart said. "Unfortunately ŁodĽ is poorer compared to Warsaw, Poznań, Silesia, Krakow and Gdańsk," so it is only now that foreign retail investment starts to pick up there.
The growing investor interest in ŁodĽ may benefit the city's reputation and provide consumers with a modern shopping experience, but another local group is not so pleased with the new hypermarkets. As in every other city visited by the retail giants, ŁodĽ's small shopkeepers are reacting to the growing number of foreign-owned hypermarkets with anger and dejection.
"Hypermarkets are destroying our retail trade," said Krzysztof Gołzbiowski, co-owner of a grocery store Sabayon, on ulica Traugutta in central ŁodĽ. He estimates that he has lost 30% of his customers to the hypermarkets, a number echoed by other small shopkeepers interviewed.
"Interest in our shop is especially lower on Fridays and Saturdays," said Aniela Bejm, the manager of PHU Pamir grocery store on ulica Zielona in central ŁodĽ. "We have lost about 30% of our clients. Nothing will save the small shops."
Jadwiga Grandys, a sales clerk at another grocery store on ulica Zielona, said that her shop has seen a 50% drop in the number of customers since the hypermarkets began opening.
"The small shops are collapsing, and nothing is going to stop it," Grandys said.
Shop keepers were unanimous in calling for some limits on the expansion of foreign-owned hypermarkets in ŁodĽ.
"Poland for the Poles, right?" Gołzbiewski said. "I don't have anything against foreigners, but there should be equal rights for small shops and the hypermarkets." All the shopkeepers interviewed said that tax breaks hypermarkets receive constitute unfair competition and are the main reason that small shops cannot compete with them. "The situation is hopeless," Grandys said. ŁodĽ city officials were unavailable to comment on the issue.
Changing view
But the situation is far from hopeless for those who have hoped to see land on the investment destination map. That wasn't the case until recently when ŁodĽ took a backseat to smaller, albeit richer, cities. Before the recent attention, ŁodĽ had only two hypermarkets, Carrefour and Leclerc, compared to Warsaw's nine, Katowice's five and Krakow's four, according to a CAL Company Assistance report.
Carrefour was the first hypermarket to set up in ŁodĽ. "Now the competition is following us," Stolański said.
Carrefour's management in France chose ŁodĽ for its first location in Poland because with more than 800,000 inhabitants it is the most populous city after Warsaw and because of the lack of competition, Stolański said. When Carrefour opened its doors here on the south side of ŁodĽ, the only other big foreign market in town was Makro Cash & Carry, which is not considered a competitor by Carrefour because it is a "cash and carry" outfit selling only to business customers, Stolański said. "Now we will have a lot of competition," he added. "There will be fewer clients."
Although it was first into ŁodĽ, Carrefour was a bit late into the Polish market. When it set up its first store in late 1997, Auchan, Casino, Hit and Leclerc already had hypermarkets up and running elsewhere in Poland. With all the new competition, Carrefour will have to change its strategy to continue to draw customers from across the city, Stolański said. "We will be doing special promotions to attract clients," including giving rebates on new appliances when customers bring in their old freezers or washing machines, he added.
And in the face of increasing competition, Carrefour knows how to fight fire with fire: it will open a second, larger store in ŁodĽ next year on land it has already purchased from private owners on the city's northwest side, Stolański said. The second location will have a sales area of about 10,000 square meters, compared to the first store's just less than 9,000 square meter sales area, Stolański said.
Carrefour is hoping that its early arrival on the ŁodĽ market will give it an advantage against the new players crowding the stage, Stolański said. The company has already adapted its strategy to the local conditions in several ways.
"ŁodĽ is a special city," Stolański said. Carrefour pursues a different pricing policy in ŁodĽ than at its locations in Warsaw and Krakow, competing with lower prices to account for the lower average incomes in ŁodĽ, Stolański said.
The hypermarket has also taken a different sourcing strategy in ŁodĽ, Stolański said.
"At the beginning we imported everything from France. But ŁodĽ is a major center for the textile industry, so now we source some of our textiles locally," Stolański said.
Carrefour is using the expertise it gained opening its first store in ŁodĽ to fuel its expansion in the rest of Poland. It will open a third market in Warsaw this year, as well as locations in Wrocław and Katowice before the end of the year, Stolański said. Next year the chain will expand to Czzstochowa, Gdańsk and Szczecin, Stolański said.
Carrefour has not seen a decrease in customers yet, Stolański said, but the new hypermarkets have not yet opened. "Of course when a hypermarket opens on the other side of ŁodĽ, customers who live over there will probably chose to go there instead," Stolański said. "The big problem is what will happen in the future."
