E-commerce is becoming increasingly popular as people are buying a wider range of goods online. They can buy groceries, a new pair of shoes, or purchase a piece of furniture for their living room, without leaving their homes. According to the US Census Bureau, e-commerce sales accounted for c. 8.4 percent of total retail sales in the United States in the third quarter of 2017 – and this percentage is expected to almost double within the next five or six years. The appeal of online shopping is attracting customers from all around the world, and Poles – both as customers and as businesses – do not want to get left behind.
Many retail companies in Poland have come to the conclusion that developing online sales channels is crucial to their further growth. The Polish e-commerce market is currently worth around PLN 35 – 40 billion (approx. USD 9.7 – 11.1 billion) and is expected to achieve double-digit growth in the coming years. As a result, many companies (both local and international) have decided to accelerate their plans to commence – or develop their existing – online operations. This dynamic is particularly visible in the fashion segment, where offering online sales is no longer an option, but a must.
In Poland, internet sales are already having a tangible effect on traditional sales channels. For example, shopping centres – which still remain very popular – are starting to see a decreasing number of customers. Many customers now visit shops just to see, touch, and try on products, before finally purchasing them online, where retailers can offer competitive prices and provide convenient home delivery. Other customers use the Internet to compare prices or check product availability in convenient locations, where they can collect the purchase at their leisure. Shopping centres, as well as traditional shops, are gradually becoming showrooms or ‘logistics hubs’ for online shoppers – a phenomenon which is now well understood by leading fashion retailers in Poland.
So what does the future hold for fashion retailers in Poland in the light of e-commerce expansion? Where are the opportunities?
First of all, Poland’s vibrant economy (expected to grow by around 4 percent in 2017 – according to a recent World Bank study), fuelled by private consumption, has built a strong foundation for the entire sector. Customers remain optimistic about their financial situation, which translates into sales and increasing turnover for retailers. E-commerce will undoubtedly benefit from this situation as customers seek more efficient and convenient ways of shopping.
Secondly, irrespective of the rapid expansion of online sales, fashion retailers do not expect traditional channels to be marginalised. They will gradually start playing a different role and become a place for meetings and entertainment, with an important element of shopping activity. Traditional fashion shops and new online sales channels will increasingly complement each other, with omni-channel strategies becoming ever more crucial. The interaction between online and bricks and mortar operations is seen by many retailers as the ideal strategy going forward, and one which can generate incremental growth.
Thirdly, e-commerce offers Polish retailers an opportunity to expand internationally (within the EU) without having to establish multiple legal entities in different countries (provided that all the legal and tax conditions are met). Many have already taken advantage of this opportunity and many more will surely follow.
Are there any challenges on the horizon?
There is no imminent risk of an economic downturn in Poland, hence the outlook for the entire retail sector, and for the fashion industry in particular, is positive. Nevertheless, there are specific legislative changes that may cause some turbulence in the near future.
The first one is related to the introduction of a Sunday trading ban in Poland. The new legislation concerning trading restrictions was passed by the Lower Chamber of the Polish Parliament on 24 November 2017 and is planned to come into force as of 1 March 2018. According to the new law, in 2018 trading will be allowed on the first and the last Sunday of each month. From 2019 trading will be limited to one Sunday per month, and from 2020 onwards the ban will concern all Sundays with some exceptions (i.e. seven Sundays in a year, including those before Christmas and Easter holidays). According to the current wording of the bill, which is still subject to further legislative process (including signing by the President), the online trading will not be affected. Potential amendments to this legislation, however unlikely, may still be adopted, hence one should wait until the bill is signed by the President to see what impact it will have on e-commerce. However, this may end up boosting sales, as customers may spend more time shopping online on Sundays, as they won’t be able to visit their favourite shopping malls.
The second one is related to data protection. Retailers often highlight the value of the information that they gain through their online businesses. They are able, in real time, to analyse customer behaviour, identify shopping patterns, and take swift action on the basis of this data. Having access to this valuable data allows retailers to run their businesses more efficiently, but it also entails data protection responsibilities. The General Data Protection Regulation1 (GDPR) is a European-wide regulation that retailers should be well aware of. It is often presented as a challenging, internationally applicable law that will revolutionise the world of personal data protection and may result in the imposition of severe penalties if not adhered to. The GDPR increases a data controller’s information obligations; however, by providing its customers with clearly defined, accurate information, retailers may also gain an advantage, i.e. a customer is likely to be more loyal towards a retailer which is transparent and complies with all of its legal obligations. This is especially important in Poland, where the level of consumer awareness with regard to personal data protection is relatively high. With respect to the distribution of newsletters or other forms of online marketing activity, it can be anticipated that fewer people will wish to sign up for such materials or continue to receive them having read all the information about the conditions of personal data processing. Nevertheless, those who sign up should be considered as solid sources of highly valuable data, which is particularly important in the fashion sector, where retailers gain their advantage through add-on services such as mobile apps, loyalty programmes or special offers that are tailored to specific customers.
The GDPR disciplines the data controller to structure a wellorganised and useful personal data collection and processing system – one that has appropriate security arrangements but also allows for an easier exchange of data. In addition, it will also simplify international operations, as retailers will be required to provide the same privacy notices to customers in various jurisdictions. As a result, they will be able to design an effective international data flow system and gain greater certainty about the validity and quality of the data that they are handling.
Although the GDPR will require significant effort from retailers, and its implementation may be burdensome, it will set equal standards for data protection requirements within the EU, and will most likely facilitate international trade within the EU.
The future in bright colours
The retail sector as a whole, and its fashion segment in particular, have strong foundations for sustainable growth in Poland. Dynamic economy, strong private consumption, and positive outlook for the future, create a stable environment, which traditional and e-commerce businesses can benefit from. Retailers should remain mindful of ongoing, as well as potential changes in the legislation (eg GDPR, Sunday trade restrictions etc.), as they look to grow their businesses in this competitive sector. As for the e-commerce itself, it does have a bright future ahead… as Poles – both as customers and as businesses – do not want to get left behind.
1 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC.