On a knife's edge

Central Eastern Europe has been touted as one of the world’s success stories for their approach to the first wave of the virus. With countries – including Poland – enacting strict and early lockdowns, the region quietly got the virus under control, a stark contrast to the chaos in Western European nations and in the US. From spring, Poland’s coronavirus case numbers were relatively steady at a few hundred a day, a pattern that lasted until mid-summer. But despite low numbers of infection, surveys of consumer attitudes from spring point to a considerably more anxious approach to spending. Nielsen, a New-York-headquartered global measurement and data analytics company, recorded lower levels of consumer optimism, with buying habits changing to a focus only on essentials. “In the second quarter, consumers’ shopping moods in Poland drastically decreased. The Consumer Confidence Index, run by Nielsen, recorded the highest drop among all European countries,” says Konrad Wacławik, head of Nielsen Retailer Services in Poland. “Above all, Poles began to negatively assess their prospects on the labor market and the upcoming financial situation of their households – which are components of this index. Only 16 percent of consumers in the second quarter of 2020 vs. 61 percent a year before had a positive opinion of their situation on the labor market,” he adds.

NEW TRENDS

An April survey on “Polish consumer sentiment during the coronavirus crisis” by McKinsey & Company, a US-based management consulting firm, found that more than half of Poles were being careful about spending their money, whilst 47 percent reported they were cutting back completely. The survey also found that over 80 percent of Polish consumers were unsure or pessimistic about the future of the Polish economy.

Those anxious spring months led to the development of new consumer trends, too. A report on Poles’ trust in retail chains during the pandemic by the Catchers, an internet marketing service, and IPC Research Institute found that consumer confidence in retail chains had declined, with 40 percent saying this was due to non-compliance with rules on the numbers of people in stores. Instead, most Poles turned to local stores, with 63 percent using these to buy fast-moving consumer goods, such as packaged food. According to the Havas Media Group’s “Meaningful Brands” report, the uncertainty of the pandemic has caused consumers to rethink their approach to life, adopting more socially-conscious and safe habits – so brands have been encouraged to turn to community-based and online offerings to meet these new demands. Aside from consumer behavior, the situation on the shop floor was also concerning. With a decline in demand for some products, inflation has been rising and the prices of fresh produce have also been affected by the triple disaster of drought, heavy rains and a lack of migrant labor, which has devastated crop collection. But everything changed with the arrival of the hot Polish summer.

MORE POSITIVITY

With no major increase in case numbers – even after the Polish presidential election – and infection rates decreasing elsewhere across Europe, anxieties melted away, replaced with the sunny, carefree optimism of the holidays. The summer months brought more positivity and confidence, with Poles seeking to return to old spending habits. Shopping malls, once neglected during the height of the crisis, saw footfall return. Data from the Polish Council of Shopping Centers showed all surveyed centers in Poland recorded an increase in daily visits, with statistics for August showing 1,400 more people had shopped than in July. Other surveys point to Poles no longer being cautious about money. As reported by “Gazeta Wyborcza,” a well-known Polish daily, only 14 percent of Poles said they intended to continue saving, compared to a global average of 28 percent, with consumer confidence rising throughout the summer months.

But the summer hope inevitably waned and as holidays ended and children returned to school, anxieties also mounted again. From a more positive position, consumer confidence suddenly slipped, particularly in terms of current household financial situations. The September reading of the GfK Consumer Moods Barometer indicated a worsening downward trend in the Polish consumer climate, with Poles less eager to buy – fearing a rise in coronavirus cases and fears of new restrictions or second lockdown. A CBRE survey separately found Poles were less keen to buy homes or take out loans. “If the reversal of the trend in consumer sentiment persists or even deepens in the coming months, then the negative effects of this tendency will also be observed on the consumer demand side,” says Maciej Siejewicz, marketing and communications manager at GfK. “The first symptoms of this trend are already visible in the current barometer reading, in the value of the component illustrating the respondents’ willingness to buy. Consumers’ uncertainty about the current financial condition of their households and the future situation of the entire Polish economy is clearly returning.”

With cases now on the rise again, concerns are also growing about the economic impact of coronavirus rules. The London-based Financial Times newspaper warned recently that governments across Central Eastern Europe have faced falling economic outputs – with a decrease of 8.9 percent in Poland – meaning governments do not want to impose tough lockdown measures again. But high infection rates may leave them with little choice, and again causing an aftershock to consumers. “In a situation where the public opinion is particularly sensitive to signals coming from various parts of the market, a further increase in the number of negative news will undoubtedly have an immediate effect on cooling the moods,” adds Siejewicz. This, he says, will also impact retail, contributing to existing competition and struggles as a result of the rising online shopping industry. “The condition for improving the mood is clarification and crystallization of the situation related to the success (or failure) in managing the next wave of infections at the national level. In other words, it is important to what extent the government will operate efficiently and inform (and not just inform) about it,” he adds. “If the moods collapse, then the confidence that has been rebuilt in recent months (May-July) and is necessary to re-create consumer demand, will collapse too.”

The current Polish consumer situation is, therefore, now in a very precarious situation – and experts are awaiting what will happen next. According to Wacławik, concerns about the impact of the pandemic are still showing signs of promise, with people less worried about the financial and health impact of the pandemic. But the situation is still uncertain and may even remain this way for a long time yet. “It should be remembered, however, that while the economy may rebound relatively quickly, the return of consumer moods to positive ones may take a long time,” Wacławik notes. “In the case of a decline in Polish consumers’ moods caused by the financial crisis of 2007-2009, the return to an optimistic perception of their financial and purchasing situation took nearly seven years.”