The Polish grocery market looks like having a healthy year to come for shoppers. This is likely to come at the expense of retailers in the country, who will have to face up to on-going challenges.
Some retailers, like Tesco, continue to struggle to halt their declining sales, while Biedronka and Lidl outgrow the competition and gain further share in the market. These developments are occurring as the government rolls out new wage and tax legislation, which will only make for even trickier market conditions.
Biedronka reports solid growth despite market challenges
Despite the impact of 13 lost trading days, due to the ban on Sunday opening in 2019, the market leader’s sales grew by 8.8% year-on-year, and 5.8% like-for-like, to reach PLN53 bn (€12.6 bn) in its full year results. It attributed this performance to the continuous development of its assortment, and improved shopping experience, primarily from the new Biedronka store concept.
Lidl Pay to launch in 2020
Lidl Poland will launch Lidl Pay mobile payment service in 2020 following a trial in 2019 and its roll out in Spain in the same year. The feature will be added to the digital loyalty programme, Lidl Plus, which is already available in Poland. Potentially, the retailer will be able to develop the app to offer more features such as scan and go. This is another step in the development of Lidl’s digital capability.
Source: Lidl Spain
Tesco Poland drags down Central Europe sales
Tesco reported its Central Europe’s like-for-like sales fell by 10% in the 19-week period that includes Q3 2019 and Christmas. Much of that performance is attributed to the double-digit decline by Tesco Poland, which accentuated the decline seen across the rest of the region. The performance was attributed to the sale of several of its largest stores, to competitors such as Kaufland and Carrefour, and the refurbishing of others to reduce their sales area. This is part of its restructuring plan to ‘release value from property’ and ‘right-size’ the format.
Frisco.pl under complete ownership of Eurocash
Eurocash said it had bought the remaining 64% share in Frisco.pl to become its sole owner. The pure online retailer starts the year with a new CEO and an ambitious growth plan, announcing it aims to grow sales by 40% year-on-year. The new ownership means Frisco.pl will have access to more resources and will be able to leverage the buying power of the total Eurocash business. Also, there is the potential for synergies from other parts of the business, such as the extension of the health and beauty range to include Kontigo products.
Wildberries, one of Russia’s largest online retailers, enters Poland
Frisco.pl is likely to face increasing competition in the short term following the entry of Russian pure online retailer, Wildberries. The new entrant is expected to offer over 13,500, mostly non-food, products at launch. This is likely to be expanded to 30,000 SKUs in the future. The company will use its learnings from its operations in Belarus, Kazakhstan, Kyrgyzstan and Armenia as it looks to grow its business in Poland.
Tougher year for retailers due to new legislation
New legislation in 2020 is likely to make the operating environment in Poland even tougher. The government is expected to increase the country’s minimum wage and could roll out a new tax structure to cover the retailing industry. The minimum wage will increase by around 16% to reach PLN2,600 (€616) per year or minimum hourly rate of PLN17 (€4). The increase is the highest in around 10 years.
Meanwhile, separately, a new sugar tax will take effect in April 2020 adding at least PLN0.7 per liter, and it will be added to alcoholic drinks up to 300ml. Following contentions between the Polish government and the European commission, as of 1 January 2020, a new tax structure will come into effect. This will mean that a retailer (excluding online) earning at least PLN17m (€4m) per month will pay tax on the excess income.
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