Luxury Goods Market Expands
March 3, 2014
Despite an economic slowdown, the luxury goods market in Poland is growing rapidly as consumers become more affluent.
In 2013, there were 786,000 affluent and wealthy people in Poland—individuals whose gross annual income exceeded zl.85,000. Their combined annual net income totaled zl.130.9 billion, according to a report called the Luxury Goods Market in Poland by professional services company KPMG. Compared with 2012, the number of affluent and wealthy citizens in Poland grew by 18,000 and their total net income increased by zl.4.1 billion. According to KPMG, the upward trend observed in recent years is likely to continue and by 2016 Poland may be home to almost 1 million affluent and wealthy people, with a total net income of almost zl.172 billion.
Even though Poles are growing more affluent, the country as a whole still has a long way to go before it catches up with Western European countries in terms of both the number of the wealthiest individuals and average wealth per head of population. In Poland, no more than 50,000 people have liquid assets with a value exceeding $1 million. In Western Europe, this group is larger, even in countries with much smaller populations such as Portugal and Finland—more than 60,000 in both cases. In terms of the value of assets per head of population, Poland is among countries at the bottom of the list in the European Union.
“The average EU citizen has $138,600 worth of assets, while the average for Poland is $20,800, ranking the country a distant 24th among EU member states,” says Andrzej Marczak, a partner at KPMG in Poland. “Only Lithuania, Latvia, Romania and Bulgaria report per capita wealth lower than Poland on average.”
While the assets of Polish citizens are growing at a much faster rate than the EU average—by 4.1 percent a year on average, it will still take some 50 years for average per capita wealth in Poland to reach the current EU average at this pace.
However, as the number of wealthy and affluent citizens in Poland increases, the value of the country’s luxury goods market is growing as well, and the outlook for the coming years is promising. According to the KPMG report, the Polish luxury goods market continued to expand in 2013, reaching zl.10.8 billion. KPMG experts predict that this positive upward trend will continue in the next several years. By 2016 the value of the Polish luxury goods market is expected to increase by a further 20 percent and reach zl.12.9 billion.
Luxury cars account for the biggest chunk of the Polish market for luxury goods. This market segment is worth zl.4.5 billion and constitutes more than 40 percent of the total value of the market. More new luxury and premium vehicles are being registered in the country even though the car market as a whole has stagnated. Especially popular among wealthy Poles is luxury clothing and accessories (zl.1.8 billion), followed by exclusive hotel and spa services (zl.1.2 billion), prestigious real estate (zl.900 million), top-shelf alcoholic beverages and cigars (zl.714 million), and luxury furniture (zl.580 million).
The luxury real estate segment and hotel and spa services will see the fastest growth in 2016, at 29 percent and 28 percent respectively, the report says. At the moment, there are 6,500 five-star hotel beds nationwide.
“At the beginning of the previous decade, foreigners accounted for 75 percent of all guests in our hotels. In 2013, Poles outnumbered foreigners among hotel guests,” says Wiesław Likus, co-owner of several luxury hotels, restaurant chains, department stores and modern office buildings. “Poles appreciate quality. They want to live in better homes and spend time in better places. They also want to eat in better restaurants. More people are ready to pay a higher price for better quality.”
Global players are aware of the potential of the Polish market—69 percent of all global luxury brands are already available in this country. Especially popular are Italian and French brands. However, in 2013, the number of such brands available grew at a slower rate than in previous years, which means that the market is increasingly saturated, the report says.
Most companies active on the Polish market for luxury goods say they are satisfied with the current situation and are optimistic about the future, according to a survey conducted by KPMG. And almost all respondents expect a steady increase in the number of customers. Not a single company voiced concern that its products and services will attract fewer buyers in the future.
Although they are satisfied with the market trend, three-quarters of the companies surveyed said there are barriers to their development in Poland. The most frequently mentioned problems included an insufficient number of potential consumers, variable exchange rates, administrative and legal barriers, and high costs of upmarket retail space.
“For many companies offering luxury consumer goods such as clothing, accessories and jewelry, a big problem is the lack of a prestigious shopping street in the full sense of the word, especially in Warsaw,” Marczak says. “A step in the right direction was the opening of the vitkAc exclusive department store on Bracka Street in 2011.”
In the middle of last year, Poland’s first Louis Vuitton boutique opened at vitkAc. This well-known French brand is just one example of the growing demand for luxury in Poland. Over the past two years, boutiques with brands such as Gucci, Lanvin and Giorgio Armani have appeared here. And other international producers of luxury clothing and accessories are eyeing the Polish market. According to the report, the number of luxury brands will increase every year.