Retail in Poland has undergone a transformation in recent years, as in most countries, starting from rising digitalisation, continuing with the COVID-19 pandemic-induced changes, the war in Ukraine and, finally, the related surge in inflation, which has affected global economies. Eastern Europe and Poland, in particular, are among the most impacted countries and stand out from other countries for rationality in spending. Inflation reached 14.4% in 2022 in Poland, and it affected disposable incomes and consumer purchasing power. Retail is one of the most impacted sectors. Almost 90% of global retail professionals saw the influence of the rising cost of raw materials and other factors caused by the war, impacting companies’ performance in 2022, based on the Voice of the Industry: Retail Survey, 2022. Sustainability, technological innovation and rationality will be used to meet consumer demand for value at the same time as cutting costs for business in order to stay profitable.
Inflationary pressure impacts Poland's retail sales despite governmental support
In 2022, retail sales in Poland decreased by 3% in constant terms, but increased by 11% in current value terms, primarily driven by inflation. In response, the government enacted policies geared towards supporting household consumption, such as raising the minimum wage and enacting "anti-inflation shield" measures, which reduced the VAT on natural gas, system heat, motor fuels, and essential food in retail stores, with the VAT being lowered from 8% to 0%. Despite these efforts, consumers limited their shopping due to reduced purchasing power, with credit costs rising due to growing interest rates.
Inflation is expected to improve slightly, but is still estimated to stand at 12% in 2023 in Poland
Source: Euromonitor International
Consumers in Poland are increasingly cautious of their spending and consistently seek the optimal balance of value and cost. Therefore, rationality plays a vital role in shaping the behaviour of both consumers and businesses. With the advancement of technology, consumers are increasingly looking for technological solutions to help them save money, while businesses are also leveraging technology to reduce their costs.
Polish consumers are opting for discounters as they prioritise rational consumption
Consumers are looking to manage their spending even more carefully, not necessarily buying cheaper but rather buying the best they can afford. Among businesses, there is now even greater focus on value creation and ensuring the affordability of product and service portfolios while aligning their offerings with consumers’ core priorities, such as convenience, personalisation, wellness and simplicity. In Polish grocery retail, discounters fill in this niche.
Over the past decade, discounters have transformed their image from offering low-priced and low-quality products to providing convenient locations and the best value-to-quality ratio. In Poland, two brands drive sales growth in the channel and, by extension, grocery retail as a whole – local Biedronka (Jerónimo Martins SGPS SA) and German Lidl (Schwarz Beteiligungs GmbH). According to Euromonitor International's Passport Retail data, in 2022, the two brands accounted for 33% of total grocery retailers sales, by value, in Poland.
Poland's discounters have one of the highest penetration rates globally, a 35% value share in 2022, which is above the European average of 17%. Still, one in six Poles plans to increase visits to discounters during the next 12 months, based on the Voice of the Consumer: Lifestyles Survey 2023. The growth of the loyalty system in discounters has contributed to the development of the category. Lidl, for example, has achieved success with its Lidl Plus app, which offers a loyalty programme with gamification features and customised deals based on customers' previous purchases. In the past, discount retailers were wary of implementing loyalty programmes. However, given the tight margins that make it difficult for them to compete on price, developing a loyalty programme has become an attractive option.
The concept of price-to-quality ratio extends beyond just groceries. Consumers utilise numerous digital tools and price comparison websites to search for the most suitable deals that align with their quality requirements.
55% of respondents in Poland extensively research the products and services they consume
Source: Euromonitor International Voice of the Consumer: Lifestyles survey 2022
Consumers who have a restricted budget tend to dedicate more time to the process of making a purchase decision.
Retailers forced to rethink store operations for cost efficiency
Retailers are starting to introduce eco-friendly solutions as a means of cutting expenses and lessening their reliance on conventional energy sources. Zabka, a major player in the convenience stores channel in Poland, opened a Zabka Eko Smart outlet in Poznan in September 2022. Zabka Eko Smart combines eco-friendly, energy-saving solutions, with smart developments designed to streamline shop operations, based on AI, which cooperate and communicate with the shop assistants.
Companies are turning to automation to replace manual tasks. With technological advancements and the introduction of artificial intelligence and machine learning, retailers are able to streamline their operations, reduce costs, and enhance the customer experience. Although there is still ample potential for automation in Polish retail, retailers have already begun to adopt automated systems across various functions, including warehouse management and customer service. For example, Pudu Robotics is celebrating the success of its partnership with supermarket retailer Carrefour, which recently deployed BellaBot units, Pudu’s smart delivery robots, at two of its retail stores in Warsaw, Poland.
Rationality in retail during the forecast period
The cost-of-living squeeze, recessionary outlook and associated political, social and economic uncertainty will intensify consumers’ focus on value even more in 2023. Polish retail sales are expected to achieve a 3% CAGR in constant terms over the next five years, driven by the growth of e-commerce, which is projected to maintain a robust CAGR of 6% until 2027. The key factor that will continue to drive consumer and business behaviour is rationality. Both consumers and businesses will prioritise efficiency and rational decision-making in their shopping habits and operations. Stores and shopping centres are expected to adopt measures such as reducing operating hours, cutting down on lighting, and turning off external lighting. Additionally, green energy solutions or electric vehicles are expected to become more prevalent.
Learn more about retail trends in our report, New Concepts in Retail, to learn how innovations are reshaping the retail environment.