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This week we spoke with Magdalena Jarus, Country Manager for Advantage Poland, to understand how COVID-19 is impacting life and retail in the country.

Q1 - What actions have local Polish retailers taken to help each other and their consumers during the crisis period?

In recent months, many retailers have taken measures to adapt to the new situation and to make shopping easier for their customers. Supermarket groups Auchan, Carrefour and Kaufland, have all introduced bundled packages containing the most essential products such as flour, rice, milk, tea, and sugar. Biedronka, the largest retail network in Poland, has established cooperation with the Glovo mobile application for ordering food for delivery to an address indicated.

The pandemic also confirmed and accelerated previously observed trends in the CPG industry, such as paying more attention to sustainable development and the need to build closer customer relations and collaborative product development. The importance of balancing sales in e-commerce and stationary channels has also been reinforced. Some retailers that had not yet developed e-commerce capabilities have been forced by extraordinary circumstances to take immediate action in this area.

Overall, the need to take a more flexible approach to business is becoming more and more relevant. Some of the largest chains in Poland have decided to temporarily switch to a 24-hour system in the largest cities, to minimize the risk of stores overflowing during peak hours and reduce the risk of virus transmission between customers.

Temporary difficulties with supply chain deliveries, caused mainly by the closure of a large portion of border crossings, drew attention to too much dependence on foreign production. This has given rise to topics related to economic patriotism and the need to transfer more production into Poland to avoid similar situations in the future.

In recent months, a growing number of CSR actions were observed within the Polish market. Biedronka donated PLN 10 million to support centers taking care of the elderly. ┼╗abka, a convenience chain, donated PLN 4.5 million to the Ministry of Health and decided to sell masks below market price. Maspex, a beverages and food producer, has donated over a million products to infectious disease hospitals.

Q2 - How have Polish consumption patterns and tastes changed as a result of the crisis?

One trend that has emerged in recent months is a preference for quality over price. People are choosing more durable products that will last longer. In turn, consumers are making fewer shopping trips but are purchasing more per trip as they look to accumulate stock. As consumers prefer to be in the stores for as short a time as possible, more and more stores are stopping to stock low-volume selling products. Having a wide assortment of products in a given category has ceased to be an advantage.

In recent months the e-commerce sector, which was already growing before the pandemic, has been developing more dynamically. This has led to the creation of new online stores as well as the transfer of activities to sales platforms by traditional stores. Before the pandemic, different studies estimated that between 55% and 62% of internet users made purchases online. This percentage, according to the Polish Economic Institute, increased during the period of social distancing restrictions by about 11% (i.e. to around 70%). This points to the fact that many stores have adapted or will have to adapt to the current market situation by implementing a multi-channel sales model. Research also reveals an almost 15% increase in the number of online stores registered on one of the most popular platforms in Poland in the first half of 2021.

Q3 - How much uncertainty is the current election runoff having on businesses?

The World Bank, in its June GDP forecast, is predicting a 4.2% recession at the end of the year, making it the worst year for the Polish economy since 1991, when the last recession in Poland was observed. The dramatic downturn is primarily due to a decline in retail sales, which is a driving force behind the Polish economy. According to calculations of the Central Statistical Office, retail sales in April declined by 22.9% YOY.

The Polish government had opted for a fairly radical strategy in fighting the coronavirus, having closed all shopping centers for almost two months. While closures did not extend to grocery stores, drugstores and pharmacies located within the malls, it had a very negative impact on their turnover as the overall number of visitors to shopping malls decreased significantly during this period. At the same time, for all stores that remained open, restrictions were placed on the number of people served.

Despite the recent increase in COVID-19 incidences in Poland (a record number of 599 new infections were recorded on Monday, June 8), the Minister of Health categorically ruled out the possibility of a complete, total lockdown of the economy.

From the point of view of both manufacturers and retailers, the presidential election carries a significant risk related to potential tax increases. The coronavirus pandemic has significantly reduced state budget revenues at the same time as the current government continues to expand social programs. Analysts say that VAT revenues dropped by more than 20% in April 2020 compared with April 2019. The re-election of the current president will probably mean the continuation of the current economic program, which with a high degree of probability, will mean further tax increases that may affect both large commercial networks and producers.