Poland – why is it a good ground for discount?
Surveys show that Polish consumers are more price conscious than the European average and this consumer concern has become even more pronounced lately. As a big part of the country’s population lives in smaller cities, a big portion of the retail market still belongs to traditional trade.
The latter is a good precondition for further growth of modern trade in general. And Poland’s price sensitivity is especially favorable for the discount format to bloom. Given the achievements discounters like Biedronka, Lidl and ALDI have shown in Poland we want to demonstrate the market environment factors which determine success for the discount or hard discount format.
If we want to evaluate the chances of hard discount success in any given country the following questions need to be positively answered to assume a high acceptance and good outlook for hard discount:
“Is the market sufficiently developed?”- in a sense that the quality level of products and shop layout and range is relatively high.
There needs to be a benchmark for the hard discount to be measured against. How does the consumer know that he is presented with discount minimalism if every other format is also painted in modesty because of poor resources?
“Are labour costs high?” The hard discount model is heavily relying on high labour costs for the rest of the industry as the shops (and administration) of the discounter have significantly less staff than other retail formats. This is what allows the discounter to have a lower cost structure and therefore to offer lower prices.
“Are consumers’ priorities and tastes right for a hard discount model?”This is a question that encompasses a set of more detailed sub questions:
Are consumers willing to buy private label and let go of the orientation and status a branded product can provide? Is a low price enough to abstain from great product choice and the option of buying delicatessen over the counter? Are local tastes so special that they need to be served with products of local flavor?
The understanding of the answers to these questions are where the real creativity of a retailer is requested. Because apart from adapting a business plan to existing consumer perceptions all those consumer attitudes are of course subject to change and can be shaped by the retailer.
In Poland discounters have worked hard alongside manufacturers to lift the quality of private label. Non-brand products are more and more embraced by Polish consumers. Big success and high growth rates of Biedronka and Lidl are witnesses of the chances that lie in “consumer education”. Especially Biedronka with its decision to give itself a local appearance rather than pointing out its Portuguese roots has made a strategic decision that definitely works. With its nationally adapted assortment that suits the local tastes it has been consistently moving forward on the right path.