Electro wars
The bloodiest part of the battle is likely to take place just before Christmas when electronics shops earn some 40 percent of their overall annual incomes, but the amount of outdoor adverts, newspaper inserts and numerous promotions indicate that a major price war has already begun.
Media Markt, a consumer- electronics chain owned by the German Metro Group, is trying to lure clients with something more than just prices - their employees will soon be posing naked in Playboy. For the time being, scantily-clad girls attract the attention of potential customers from numerous billboards around Poland. But Media Markt, already known for its controversial promotion methods, is not the only one trying to get noticed.
Feeding frenzy
Some 30,000 people stormed Warsaw's first Electro World on its openieng day encouraged by one-day bargain prices such as laptop computers for zł.999. Managing director of Electro World Polska Jacek Gruchalski declared that the company will invest EUR 10 (zł.40) million in opening six to seven stores by the end of 2006, expecting to break even after five years of operations. Electro World belongs to British electrical goods retailer DSG International Plc., formerly known as Dixons.
The Polish consumer electronics market is already divided between big players such as Media Markt, Saturn, RTV Euro AGD, Avans and Neonet. However, they are not all concerned about the entrance of a new player. "Neonet targets different customers. We open our stores in towns with up to 200,000 inhabitants while Electro World only plans to operate in big cities," says Magda Kołodziejczyk, Neonet's spokesperson.
Tight competition
Neonet's position is rather to be envied. With its main competitor, Mars, announcing bankruptcy, it is the strongest contender to take over Mars's customers. Neonet owns 350 stores around Poland and would soon like to be floated on the Warsaw Stock Exchange. So far, small and medium-sized towns remain untouched by foreign capital in the sector.
The situation is much more difficult for Media Markt. Electro World's first store opened in Warsaw's Targówek and the next will open in Janki - right next door to Media Markt outlets, on premises belonging to Ikea, which is Electro World's strategic partner.
The price war will certainly satisfy customers. "I don't think one of the stores will be eliminated - there is enough room for both. As for the prices, big stores like that promote single products and the research shows, surprisingly, that prices are generally lower in small shops," explains Małgorzata Machnicka, a retail analyst from PMR Publications.
The battle of giants
According to Michał Gierbisz, head of the retail and technology department at GfK Polonia, prices of consumer electronics have to fall because of the introduction of new technologies, and big chain stores usually offer discounts on older models. "The price war is to some extent artificial. The price of each product contains some fixed costs that simply cannot be reduced. One can of course expect that with the appearance of Electro World one will be able to buy a perfectly good TV set for just zł.90, but it is sure the store will have to cover the difference. The question is: How long they can go on like that?" says Gierbisz.
Both Media Markt and Electro World have lots of capital standing behind them - the former of the Metro Group whose investments in Poland surpass EUR 1 (zł.4) billion and who is also one of the biggest employers in Poland with 19,000 people working for the concern, the latter of DSG whose value is estimated at some Ł2.6 billion (zł.15 billion) and whose stores can be found in 14 countries around the globe.
According to Gierbisz, the importance of DSG launching operations in Poland is a little overestimated. "There are more than 3,000 consumer electronics stores in Poland. Media Markt has 29 stores and RTV Euro AGD 111 - Two more Electro World stores won't cause a revolution. We just have to wait and see what happens next."
