Fashion frenzy
By : Anna Kocinska
Marysia, 14, visited Warsaw's Galeria Centrum for the first time last Tuesday.
"I'm looking for a smart dress to wear to the school ball," she said. Marysia had been saving her money for something really special. "I thought prices would be really expensive here, but they're not much different from what I saw in other shops, and I spotted really great designs."
It's been a year since the first two floors of the formerly state-owned Domy Towarowe Centrum (DTC), now known as Galeria Centrum, opened in Warsaw to reveal a completely refurbished interior and an expanded selection of goods.
After a 50-year commercial drought, Poles are being offered a wide choice of goods from a variety of retail outlets. Not only can they buy food and cheap clothes in supermarkets on the outskirts of cities, they can also purchase leading international and domestic fashion brands without leaving city centers. Varsovians and inhabitants of six other Polish cities Krakow, Szczecin, Gdansk, Lublin, Wroclaw and Lodz can now shop at stores that sell brand name products under one roof: Galeria Centrum's. The Warsaw location, however, is rife with memories.
Gray beginnings
Established in 1968, DTC was the only state-owned department store chain under communism. For years, it was the destination for customers frantically looking for something stylish and colorful.
What they usually got, however, was limited choice and long queues.
In 1998, Netherlands-based Eastbridge group bought 70% of the company from the Treasury Ministry through its subsidiary, Empik Centrum Investments (ECI). ECI is 80% owned by Eastbridge, while the European Bank for Reconstruction and Development (EBRD) and AIG each have a 10% stake.
Today, Galeria Centrum carries more than 400 international labels. Like London's Debenhams or New York's Macy's, Galeria Centrum outlets are multifloor department stores situated in prime high-street locations, specializing in clothing, accessories and cosmetics.
"Of course that's the successful model in every capital of the world," said Janet Choynowski, managing director of real estate agency Prime Property. "And something needs to exist in the center of Warsaw, because if it doesn't, the center will become a ghost town. I am very glad to see that they upgraded the Galeria."
Although Warsaw's Galeria Centrum attracts about 30,000 people daily, Maciej Dyjas, the retail operations president at Eastbridge, wouldn't say what percentage of that number are actual customers. "Last year, we served 10 million people in our stores throughout Poland," he said.
The new Galeria Centrum didn't have any difficulty introducing itself to Varsovians. It has a perfect high-street location and is in walking distance from Warszawa Centralna railway station. It's also situated opposite the Palace of Culture and Science, Stalin's 1953 gift to Poland and a symbol of the communist era without which many city residents couldn't imagine their capital.
They had also gotten used to the old DTC.
"If the Galeria wasn't here, we would all lack something because we were used to Domy Centrum. It has been here as far as I can remember," a young woman from a development company said.
Most of DTC's former customers also remember the terrible service they received there. But some of Galeria's current clients admit that not much has changed.
"What I feel is still reminiscent of the old days is the personnel," said Katarzyna Zak, an oil market analyst at Polski Koncern Naftowy (PKN) who is a frequent customer at Galeria Centrum. "Quite often you can hear sales clerks' personal conversations, as a result of which they forget about customers."
According to a report released earlier this year by real estate agency Healey & Baker, a significantly greater number of Poles than other Europeans expect a high level of service and knowledge from sales staff.
In 1999, sales revenue from all Galeria outlets amounted to zl. 350 million ($89.7 million). In Warsaw alone, revenue stood at about zl. 130 million ($33.3 million). "(The figure) was low because part of Warsaw's stores were closed due to renovation works," Dyjas said. He added that he has more ambitious plans for this year. "In 2000 we want to hit (revenue of) zl. 180 million ($43.9 million) in Warsaw and zl. 400 million ($97.6 million) at all of our stores," he said.
Trade philosophy
According to the Healey & Baker report, brand awareness is increasing among European shoppers, as is the affordability of such products for a wider market. "Significantly more Polish shoppers agreed with such a statement than other Europeans, (46% as compared to 25% in the Czech Republic and 26% in Hungary)," the report reads.
Galeria Centrum's trading concept is based on the conviction that brands are what will increasingly attract more customers.
"It's our rule to sell nothing but trademark products," Dyjas said. Galeria Centrum offers a wide range of well-established international labels, including Betty Barclay, Timberland and Tommy Hilfiger, as well as domestics such as Bytom, Vistula and Hoffland. Hoffland, which targets young customers, is a brand that links the building's DTC past with its Galeria present.
Of Galeria's products, 60% are made in Poland and the rest come from abroad. However, the 60% figure includes international brands produced here.
According to Dyjas, the brands that Galeria offers are important. "We try to find brands that are trendy," Dyjas said. "We pick up brands that catch the spirit of the times and are addressed to a younger, up-to-date clientele."
Galeria routinely introduces new and unknown brands that match their brand profile. Sense Philosophy, a producer of natural cosmetics, has offered its products in the Warsaw, Wroclaw and Lodz Galerias since last year.
According to Dyjas, Sense Philosophy products were exactly what Galeria was looking for. "It's a trend on the body care market," he said. "Something a little bit like Body Shop was what we needed."
Pricing is another important element of Galeria's sales strategy. "We try to keep prices on a low-to-average level," Dyjas said. "There are a few really expensive products at Galeria Centrum designers such as Cerutti or Kenzo that don't sell well but we keep them because there should be something people can stare at."
"Not everybody is looking for the cheapest price all the time, and it's wrong to expect that," Prime Property's Choynowski said. "In Poland there are a lot of people who make good money, and in Warsaw particularly there are young people who earn very good money and have a lot of disposable income."
Zak, the PKN analyst, comes to Galeria quite frequently. "There are a lot of different brands there, so you can find both cheap products and very expensive goods," she said. "But many of them are international brands (featured) for the first time in Poland, so even a high price is not excessive for such a brand."
New image
The volume of goods on offer at Galeria Centrum, as well as its 13,577-square-meter shopping area, is not for everyone.
"I go shopping there from time to time but personally I think that it's quite hard to find what you're looking for," Madej said. "Products are mixed up and even if I know what brand I'm looking for, it's hard to find it."
But Galeria's floor plan also has supporters.
"Thanks to the organization of the departments, one really knows where to find clothes to meet one's taste," Zak said. "I definitely prefer this format to that of shopping centers with boutiques where I feel trapped by staff."
Galeria's layout and decoration are the result of careful study. It consists of several departments such as men's, women's classic and casual, lingerie, lifestyle and home, and a cosmetic and body care department offering various well-established brands.
The modernization program has embraced all of the former DTC's stores. In Warsaw, the refurbishment was done gradually so that every few months a new, modern-looking floor or department could be opened. Recently, Galeria gained a home and decoration department below ground.
"We invested zl. 200 million ($48.8 million) in repairs, half of it spent in Warsaw," Dyjas said. "This year we'll spend less on repairs, just to finish what was started last year. It will cost some zl. 40 million ($9.8 million)."
With all the renovations, modern escalators and lighting, Galeria still lacks cafeterias and restaurants where shoppers can have coffee and something to eat after tiring shopping trips.
Dyjas has promised that two 200-square-meter, ECI-run cafeterias would soon appear. "No outside company was invited to do this for us because we wanted to compose them well with the rest of the store," he said. Within a few months, a new restaurant will also open. This time ECI will lease the 300-square-meter space to a private operator. "It won't be an international food chain (because) those operating in Poland offer fast food and we wanted to offer international cuisine that would meet the tastes of our customers," Dyjas said.
Everything under one roof
According to Anni Sovik, director of the Klif shopping center, a Galeria Centrum competitor, Klif has become a success because it provides one-stop shopping.
With 25,000 square meters of shopping area, Warsaw's Klif has been open for 13 months. It has 103 tenants, which represent various brands, as well as restaurants, bistros, cafeterias and a supermarket. In March the turnover rose to more than 25% compared to last year.
"We specialize in fashion but at the same time have more to offer, and the trend is going this way," Sovik said. "Poles also want to spend more time at a shopping center." According to Klif, Poles spend on average two hours at a shopping center, as opposed to the hour spent by Norwegians, for instance.
Choynowski, however, has reservations about the diversification of shopping centers. She says a centrally located department store is no place to shop for food.
"Some small high-quality food stalls where you can buy wine and delicatessen products, yes," she said. "But you are not going to queue behind somebody buying pork chops and milk the way you do in a hypermarket."
"We don't plan to create a food chain in our stores," Dyjas said. "It's not our goal to sell food."
Nevertheless, meeting customers' needs is a priority, so he plans to open food stalls at Galeria. "But only in Warsaw as we are not Harrods," he said. The deli stalls will be run by one of the largest food chains operating in Poland, and Dyjas said negotiations were pretty advanced. "We will offer ingredients for various ethnic cuisines. It will be an exclusive place," he said.
Expansion plans
Dyjas expects investments in the Galeria Centrum chain to pay off in seven years. He said he's already planning the company's expansion because as DTC's new owner, ECI has the right to purchase 20,000 square meters of land on ulica Swietokrzyska above the metro station. However, the deal, which ECI made by buying DTC, raised doubts about the transparency of DTC's privatization. The information memo issued by the Treasury Ministry and made available to potential buyers at the time of the sale contained no information regarding the right to buy more land in the center of Warsaw, which was granted to the old DTC in 1989.
The land is owned by Warsaw's Gmina Centrum. "ECI will be able to take over the land (for 99 years) without a tender and at the beginning they will have to pay 25% of its market price," said Leszek Cislo, director of Gmina's development and economic policy department. The rest of the payment will be settled in 3% installments. While large plots are cheaper, the price of land in central Warsaw may go as high as $2,000 per square meter, Cislo said.
"We haven't bought it (land) yet although we have already prepared a zoning plan for the plot," Dyjas said. "Our goal is to construct a shopping and apartment center but to do that we need to reach an agreement with the gmina, which owns the land, and the metro (operator)."
According to Cislo, ECI already approached the gmina with a suggestion of establishing a partnership. "They would finance the construction, and we would give the land," he said. "But we are not going to talk about this proposal unless we know what reprivatization claims to the land might occur."
Reprivatization is a hot issue in Warsaw, where property was completely nationalized after World War II. Once communism collapsed, restitution claims started to block investments. A $110 million project on plac Pilsudskiego, for instance, was stopped by Count Jan Zamoyski, a wealthy landowner in pre-war Poland, who unexpectedly claimed ownership of the site.
However, Dyjas gave the impression of a man who is positive the situation is under control. "Such a transaction always implies a reprivatization risk, so the ownership status of the land has to be thoroughly checked," he said.
