Textination Newsline

• Retail consolidates 
• Market leader LPP continues to expand

Apparel and footwear sales in Poland are rising by around 5 percent annually. An increasing proportion of sales is generated online. The German discounter chain KiK is spreading successfully. There are market niches for high-quality fashion from Germany. The leading domestic retail chain LPP is expanding at home and abroad. It not only invests in new designs but also in the online segment. The retail structure is becoming firmer.

The Polish retail trade in clothing and footwear is consolidating. The number of stores drops by about 1,000 a year. The main reason, according to the daily Rzeczpospolita, is the growing online trade. For large retail chains, active in both local and virtual trading, this trend is not negative: they are even opening up more traditional sales stores and increasing their sales.

Sales of clothing and footwear in Poland (EUR billion)

2013	2014	2015	2016	2018 *)
6.9	7.4	7.7	7.8	8.4

*) Estimation

Source: Market research Company PMR

Small businesses do not have these options. They have difficulties to survive in the tough price competition and are in part pushed out of the market. Additional competition is coming d from discount and hypermarkets that are further broadening their apparel range. These include not only large grocery chains such as Biedronka, Tesco and Lidl, but also the specialized textile discounters Pepco with almost 780 and KiK with over 200 clothing stores. They are also pursuing further expansion plans.

Number of shops for clothing and shoes

2016	2017	2018 *)
39,000	38,000	37,000

*Forecast

Source: Euromonitor International

According to a report by the market research firm Gemius apparel and accessories form the product group that Internet users most frequently order on the net,. By contrast shoes occupy only the seventh place. In Poland, however, only a few percent of the sales of clothing account for the Internet. The growth potential therefor is still considerable. Large companies could double their online sales annually.

Online purchases of individual product groups by Internet users 2017

Product group	Entries in %
Clothing, accessoires	72
Book, CD	68
Small electronic devices	56
House, audio-, video equipment	55
Cinema and theatre tickets	54
Cosmetics, parfumes	51
Shoes	49
Computer and similar devices	48
Sportswear	46

Source: Gemius

So far, auction platforms have played the biggest role in online apparel purchases, according to Instytut Badan Rynkowych i Spolecznych (IBRiS, Institute for Market and Society Research) in a survey of Internet users for Rzeczpospolita..

Proportion of online procurement sources of clothing in Poland (in %)

Auction platforms	Brand stores	Stores with many brands	Others
39.2	38.2	13.7	8.9

Source: IBRiS

LPP opens 50 sales salons

Notwithstanding the e-commerce boom, the leading retailer LPP, which includes the brands Reserved, Mohito, Cropp, Sinsay and House is continuing to expand its retail space. This contains already a total of just over 1 million square meters. By mid-2017, LPP owned 1,710 stores in just under 20 countries. In September, the company from Gdansk opened the first Reserved boutique in the United Kingdom on London's Oxford Street. LPP revenue increased on a zloty basis in by 17% in 2017 to almost EUR 1.7 billion.

LPP wants to expand further in 2018, according to its Deputy Chairman Przemyslaw Lutkiewicz. The chain plans to open around 50 new sales stores at home and abroad. New markets are to be developed: Kazakhstan, Israel and Slovenia. In the future, LPP wants also to be represented with its most important brand Reserved in Paris and Milan. In addition to an internet shop since mid-2017, the company already operates 19 sales salons in Germany.

LPP is constantly bringing new products to market. According to its chairman, Marek Piechocki, the company aims to have 2,000 people working on its research and development (R & D) projects by the end of 2018. That would be a number of 800 specialists more than in autumn of 2017. The research and development budget should be increased to EUR 48 million and will be used especially for the design of new clothes.

So far, 810 fashion designers have been designing around 40,000 garments annually for LPP. The shops are staffed by 40 architects and coordinators. About 250 programmers introduce new technologies, especially in the field of e-commerce. LPP wants to triple the number of IT experts in a medium term. In fall of 2017 the share of online sales of LPP brands was 4 percent. It should even double by 2020.

Premium brands are increasing

The Spanish company Inditex with its brands Zara, Oysho and Pull & Bear is not missing in any shopping center in Poland. It should therefore continue to expand there as well. The Swedish H & M is developing not only its online business but its retail business as well and will open a new store in Tychy in March 2018.
In view of the increasing employment rate and the purchasing power of the Poles, the sales opportunities for high-quality clothing from Germany are also rising. Among other things the potential can be seen in the domestic Grupa Vistula, which increased the Polish retail space of its elegant brands Vistula, Wolczanka, Deni Cler and W.Kruk in 2017 by 9 percent to almost 33,500 square meters. Additional space is added on a franchise basis. The men's outfit Bytom, whose merger with Vistula persist in persistent rumors, is expanding its trading base.

Footwear company CCC is growing abroad

The Polish shoe group CCC, consisting of the largest domestic shoe manufacturer and the operator of the CCC retail chain, generated revenues of more than EUR 984 million in 2017. This was around EUR 235 million more than in 2016. The stationary CCC stores earned EUR 796 million (+24 percent on a zloty basis).
The group wants to expand accordingly. Among others seven stores should be opened or expanded in Austria in 2018 while three new branches will be set up in Croatia and Slovenia. CCC operates more than 900 shoe stores in 16 countries, including 77 in Germany and 45 in Austria.
In September 2017, CCC secured EUR 127 million from investors for the expansion of its online activities through the issue of new shares at the Warsaw Stock Exchange. In some markets, such as Greece, CCC is exclusively virtual on a customer hunt. In Poland e-commerce is also picking up its speed: the online business of the eObuwie.pl group increased its revenue in 2017 by 111.5 percent over the previous year to more than EUR 142 million.