Echo aro und Poland

Most new shopping centres in Poland are built in Silesia, Warsaw, and other large cities.
Echo Investment, who are developing a chain of regional shopping centres, want to convince us that it is easier to conquer markets
in smaller cities.

The retail centres which have recently arrived in Warsaw, are giants bringing around 200 shops together at any one time. CERPF, investors in Wola Park, (a complex with 190 shops), estimates the cost of its construction as around Eur 100 mln, while Echo Investment has spent only PLN 300 mln and has spread it over 14 centres.

The scope
Echo's shopping centres naturally do not stand comparison with the gigantic structures built in Warsaw. The Kielce developers' centres follow the same pattern: they have up to a dozen or so thousand square metres of space, they usually consist of one supermarket, (eg Albert, Champion or Edeka), a DIY store, (eg Nomi), and a number of shops in the arcade. Construction costs from PLN 10 to 40 mln and usually takes around 8 months. Rents are around EUR 9 sqm for major tenants, while others pay more and a standard ten-year agreement is usually signed.

The chain
Echo owns centres in Bełchatów, Jelenia Góra, Olkusz, Pabianice, Piotrków Trybunalski, Piła, Płock, Przemyśl, Radom, Siemianowice, Świetochowice, Tarnów, Tczew and Zamość. Interestingly enough, however, the choice of location has not always been down to the developer. ,We have invested where locations suggested by us, coincided with the strategies of our tenants," - says Andrzej Majcher, President of Echo Investment. ,Our development has converged somewhat with the development strategy of Ahold, for instance. This is because we never begin construction without prior contracts." Echo's main clients are chain shops such as CCC, Deichman, Foto Joker, Drogeria Natura and RTV Euro AGD.

The Idea
How did this idea, of shopping centres in towns where developers usually steer clear, come about?  One of the reasons was easier markets. "Since there is no other similar chain competing on a national scale, we only have to reckon with local competition from individual shopping centres," says Mr. Majcher
To a large extent this notion seems to be correct. At a relatively low cost, it is possible to win markets where customers don't have the wide range of products on offer and continuous promotions available in Warsaw and, according to Echo, all the centres are self-sufficient.

Concerns
For Jan Maciejewicz of A.T. Kearney, (consultants who analyse the Polish retail market), while competition in towns is lower, incomes are lower too and so it follows that spending power is weaker. ,The smaller the city, the larger the proportion of the market that is taken up by family shops, which have very low costs and with which it is very difficult to compete,"  claims Mr. Maciejewicz.
Where do we draw the line between towns, where it is and is not a good idea to build even small-size shopping centres? ,My concern is that in towns where it is worth doing this there are already western chains. However, smaller markets can be won over by a different range of outlets, such as discount and specialist shops," says Mr. Maciejewicz

Plans
Echo's latest plans are to develop centres in Tczew, Pabianice and Olkusz and build two large retail and leisure centres in Szczecin and Kielce and they hope that all the centres will have paid for themselves in 6-8 years time. Such plans are realistic and similar estimates have been made by other firms currently operating on the Polish market.