Putting on the ritz
Once dismissing the country as an unnecessary market, high-street retailers are now pouring in as Poles indulge their desire to own high-end products
Gucci, Prada, Louis Vuitton, Fendi and Chanel - these are just a handful of the designers leading the luxury fashion segment around the world. While the global luxury-goods market, worth an estimated $22 (zł.58.6) billion, is seeing double-digit annual growth in much of Europe, Asia and North America, many coveted brands have yet to enter the Polish market.
Over the past decade, investors have gradually introduced the likes of Burberry, Hugo Boss, Max Mara, Versace and Emporio Armani to the market. Analysts cite at least a dozen more big names rumored to be hot on their heels, with Louis Vuitton, Chanel and Donna Karan among the firms that could enter the market within the next two or three years.
Mintel, an international research company specializing in the luxury market, gives a consensus definition of luxury goods as "the top sector in any product market." Mintel notes that an essential characteristic of these goods is their desirability for their own sake, rather than for their functionality. This "aspirational" element to luxury goods has led to an expansion of the luxury market beyond the traditional target group.
In effect, not only are companies diversifying their product portfolio to include less expensive diffusion lines, or "spin-offs," but many consumers are spending more than they can afford simply for the sake of owning a luxury product.
Carpe diem
According to Andrzej Sadowski, vice president of the Adam Smith Research Center, such behavior is an integral part of the Polish consumer's mentality.
"Poles tend to take a carpe diem approach to living. A common Polish expression is 'In Poland, you can't afford to buy cheap,'" explained Sadowski, adding, "Poles want to look better and feel better about themselves and luxury brands are a symbol of their ability to attain this higher standard. Reaching for a higher standard and a well-made, durable product is what drives Poles to extend their spending power further."
Rising salaries mean that Poles have more money at their disposal than ever. Recent data from Boston Consulting Group cites over 100,000 Poles with at least zł.1 million at their disposal.
"Polish consumers are gradually getting richer and are increasingly eager to shop at upscale boutiques and gourmet delicatessens," remarked Małgorzata Machnicka, head retail analyst at PMR. The warnings of impending inflationary trends that inevitably follow rapid economic growth in developing economies only further encourage consumers to spend. In response, retailers, particularly in the high-end segment, are stepping up their activity to meet heightened consumer demand.
Growing market
According to Sadowski, the sudden injection of capital into the luxury segment indicates that Poles hold greater spending power than the Economy Ministry's statistics give them credit for. Consumer confidence alone rose 9.9 points in August, y-o-y. While there are no official reports available on the luxury segment specifically, Machnicka cited an estimated market value of some zł.200 million, indicating 50-percent growth over the past two to three years.
"We have observed steady growth on the luxury market since the mid-1990s, confirmed by consistent market research," says Paradise Group president Jerzy Mazgaj, "This has assured us of the sucess of the company's activities in bringing new luxury brands to the market."
Following the recent openings of the Burberry, Zegna, Emporio Armani and JM Weston boutiques on Warsaw's Pl. Trzech Krzyży,the group will open stores for Hugo Boss Woman and Max&Co (Max Mara Group) there in the fall. Flanked by landmark townhouses that host close to a dozen designer boutiques, Pl. Trzech Krzyży has become Warsaw's equivalent of Madison Avenue or the Rue du Faubourg St. Honore.
The square and its satellite streets, Nowy wiat and Mokotowska, are expected to undergo a complete regeneration - extending the trail of designer shopping from Pl. Zbawiciela to Pl. Zamkowy - over the next decade. Mokotowska street is already home to a number of top-tier fashion, interior-design and gourmet-food shops. Last Thursday, the L'Aura boutique celebrated its grand opening.
"After years of experience in the fashion industry in New York, Milan and Paris, I decided it was time to open my own boutique in Warsaw," said the boutique's owner, Laura Jasińska. Jasińska did point out, however, that setting up the business was a complex and arduous process, particularly as many of the designers she approached were initially skeptical.
"They claimed they didn't need to be in Poland and a presence in Moscow was enough." Jasińska's complex conceptual plan for the store's design, its future inventory and target clientele won over executives from Kors, Marc Jacobs and Hussein Chalayan, among others. The store's sleek interiors, designed by renowned Paris-based architect Matteo Messervy, are a fitting complement to its avant garde merchandise offer.
Domestic bliss?
But all the talk of luxury in Poland begs the question: what about home-grown luxury brands? While there are a number of high-profile Polish designers such as Gosia Baczyńska, Dawid Woliński and Justyna Chrabelska catering to the niche celebrity market, few of them have managed to secure the capital or investors needed to fuel further development.
Deni Cler is the most recognizable Polish-owned designer brands on the market, with 26 boutiques throughout Poland and plans for up to 15 more over the next few years. The company just added a flagship Cacharel franchise to its portfolio and is in negotiations with other high-profile global brands. The company, owned by the Kruk group, is considering an IPO in the near future along with expansion to other countries in the CEE region.
Kruk also operates the W.Kruk fine jewelry stores, which offers a selection of pricey watches from Gucci or Rolex. Many luxury brands have become household names through the dissemination of top-shelf cosmetics and accessories by firms like W.Kruk and EM&F's Sephora and Optimum Distribution networks.
Designer cosmetics, fragrances and eyewear products (vastly more affordable than designer clothing) are often a consumer's first contact with a designer brand in many developing markets. EM&F's media stores have also been instrumental in making international high-end fashion magazines like Vogue and Vanity Fair accessible to the greater public. In addition, the evolution of editorial content and advertising in local publications created invaluable brand awareness for luxury brands in the consumer consciousness years before these companies made an official foray into the market.
However, finding a good location is one of the biggest challenges facing luxury retailers in Poland, as prime properties are in dire need of renovation and are becoming increasingly scarce. One solution for the industry is taking operations online. This December, just in time for Christmas, Accessorium.com, a new internet portal courting only the wealthiest Poles, will be launched. The service, available by invitation only, will offer accessories from top international and domestic fashion companies. According to Richard Piotrowski, head of operations for Accessorium.com, there is a great deal of enthusiasm for the project on the part of investors, designers and consumers.
"The exclusive Polish customer is ready for a new service that will offer an online experience that will cater to his or her refined tastes," declared Piotrowski.
Executives of Paris-based LVMH group (which owns Louis Vuitton, Donna Karan and Givenchy) neither deny nor confirm LVMH's interest. When their time comes the Polish market will be ready and waiting.
