Success reserved

Reserved clothes shops are popping up all over Poland at an impressive rate, but to what extent is this spectacular growth determined by strategy rather than chaos? And is it easier to conquer Ukraine or Germany? In an interview with Dariusz Pachla, Vice-President of LPP, and the person behind the chain's rapid development, Eurobuild seeks answers to these and other questions

Reserved is the largest clothing chain in Poland and it owns almost sixty outlets around the country...

I'm not sure exactly how many shops we have because the number changes rapidly, though I do know that we went beyond sixty a few days ago: in mid-December, that is. I actually can't help but wonder whether LPP has a strategy at all when it comes to opening new outlets.

You seem to open up in every newly-launched shop-ping centre

There's a grain of truth in that. We try and establish a presence in most shopping centres for a good reason, in that in Poland, compared to Western Europe, such units are few and far between, and we believe that those emerging earlier will gain a stronger position on the market. That's why, for the time being, we're going in almost, and I stress, "almost", everywhere. Later might be too late.

Isn't there a danger that your own shops will end up being in competition with one another?

We realise that two shops located at close proximity to one another, will not generate the same volume of turnover as two outlets at opposite ends of the country. However, if those two shops have an average turnover of 75-80 per cent, it's still satisfactory.

Doesn't such dynamic expansion pose the risk of over-investment?

We take that into consideration, of course, but let's remember that lease agreements aren't eternal, and if we remember that our expansion began four years ago, the first five-year agreements will start to expire next year. Then we'll decide whether or not to stay in particular retail centres.

Have you ever closed down any of your shops?

We've closed down three outlets, the last of which was in Nowy Świat in Warsaw at the end of November, and the other two in Bytom and Katowice. We also significantly reduced the size of an outlet on ul. Grunwaldzka in Gdańsk.

Five of your shops have been franchised. What made LPP consider this option?

We began this experiment three months ago for a number of reasons. First of all, it allows us to develop the sales network at a lower cost. The franchiser covers the cost of opening and running the outlet, and we supply the product, organize the logistics and ensure the level of service is identical to the rest of the chain. We then share the investment risk with our partners, and thirdly, because of the franchise, we can then enter the markets of smaller towns, such as Konin, Puławy, Siedlce or Płock.

How do you view the experiment so far?

It is still too early to congratulate ourselves, but the results so far have been more than satisfactory. The brand has gained popularity and each outlet occupies several hundred square metres.

This must make you popular with developers

We can see that developers respect us and want us in their shopping centres, which of course, translates itself into the financial terms of our agreements. As far as the brand's popularity is concerned, I believe we're on the right track to being widely recognised and esteemed.

You're going to launch Cropp, the new brand for adolescents, this spring. How is this going to influence Reserved's expansion?

Not a great deal. In terms of marketing, the two brands will have nothing in common, as Cropp's shops will adopt a different style and interior. They will tend to be smaller, about 250 sqm each. We're aiming at around 35-40 of them by the end of the year and they will be more expensive than Reserved outlets. The reputation we've earned among developers is paying off now and we can usually count on space in their units.

You're planning to expand widely abroad. Is it going to be made easier because of your cooperation with international developers in Poland?

To a certain extent, yes. We have two shops in Polish shopping centres, which were built by ECE Project Management. We also work with them in Hungary, where we've already got a shop and are about to open another in a centre there. Werner Otto, head of ECE, and Marek Piechocki, President of LPP, have met, which I think reflects the positive relationship the two companies have. I hope that one day we'll be able to work out the details with ECE in one place, ideally in Poland, without any need for mediation from local companies. Our expansion, however, is directed towards Ukraine, which is still off the beaten track for most international investors, and where neither Polish, Czech nor Hungarian is of any use to us.

What made you consider Ukraine? Aren't the Czech and Hungarian markets more attractive?

The Ukrainians are admittedly less well off than our southern neighbours but their country has several interesting features. With fifty million inhabitants, it's a huge market. Even if Kiev's purchasing power is considerably less than Wrocław's, for example, the fact remains that it has a population of three million. Opening a shop in a city like this, doesn't involve any serious risk, and we'll be one of the first chains entering that market, just as we were in Poland several years ago. One other reason we expect to be successful there is that there is very little competition.

You plan to open a Reserved shop in Berlin within the next year or so. Given your cooperation with ECE, will this mean opening it in one of their shopping centres?

We've looked at seven locations in Berlin, in a number of retail units and a few streets, including the elegant Kurfürstendamm, but we haven't taken the final decision yet.

You conquered the Polish market thanks largely to your high level of service and modern shop layouts, compared to local standards. Is this enough to make inroads westwards?

We have much more to offer than snazzy interiors, believe me. Our competition here does not lag behind in that respect, after all. As far as the West is concerned, those are markets hungry for novelty, and that's precisely the reason why we should succeed there.