Do it yourself

In July 2013 word got out that German DIY store chain Praktiker had applied to enter bankruptcy proceedings with a district court in Hamburg for itself and its eight German subsidiaries. The reason? Approval had not been secured for a financial restructuring plan for the troubled company. Shortly before this Praktiker had wanted to sell its subsidiary Bâtiself, which is registered in Luxembourg. This also ended in fiasco for the company. In a subsequent statement to the press, Praktiker went to lengths to stress that the situation in Germany would have no impact on the company’s business in other countries, such as Poland. Praktiker had started its restructuring process in May 2012, which mainly involved converting its DIY outlets into Max Bahr stores – one of the company’s new concepts. Fifty-four stores had changed logos by the end of March 2013 and immediately started generating higher revenues. However, last year’s long winter and falling turnover in the DIY segment prevented the rebranding from being completed. As ‘Eurobuild CEE’ has since discovered, the Polish subsidiary of Praktiker will not comment on the situation in any way or make any statements about the chain’s plans for Poland.

The future is... pink?
Praktiker currently has 24 stores in Poland in 21 cities and towns including Czeladź, Częstochowa, Gdańsk, Grudziądz, Katowice, Kielce, Kraków, Leszno, Lublin, two stores in Łódź, Olsztyn, Opole, Piła, two stores in Poznań, Radom, Rybnik, Rzeszów, Warsaw, Janki, Wrocław and Zabrze. The combined area of the stores exceeds 213,860 sqm. Will this space now be up for grabs? According to unofficial sources, Praktiker is not discussing lease contract terminations. DIY store networks believe that changes in the market in Poland are inevitable. However, Praktiker’s bankruptcy and rumours about the bankruptcy of another chain do not signal a major shift in the market. “The fact that one chain has announced bankruptcy open to arrangements and another is struggling does not mean that they will cease operations completely. They will probably close down some of their outlets, but the rest could continue operating under the current or a new brand. Thus the impact on the market will probably be limited,” believes Arnaud Boule, the general director of Bricoman Polska. Nonetheless, there will still be some changes to the market. The competition is now preparing to get their hands on the post-Praktiker outlets. German chain OBI has been considering taking over all of the stores, but in the end may only decide to acquire a few of these locations.

Change is in the air
Those companies that are not struggling believe that 2014 will be the year when the DIY market experiences a revival. “It seems that the downturn on the market, which lasted from 2012 until H1 2013, has now ended. In the last few months we have noticed that things are picking up – especially last December, when the window for recovering VAT for construction materials used for individual clients was coming to an end. We expect the growth trend to become stronger in 2014,” adds Arnaud Boule. The space owned by chains likely to go bankrupt is not suitable for everyone, though. “There are a number of locations that we consider to be interesting. However, we are keeping an eye on further developments. If it turns out that something definitively means the end of Praktiker operating the stores, we will take the potential possibilities into consideration. The number of locations that we could take into account will not be significant – from three to five. It is worth adding that Praktiker outlets are much bigger than Jula’s, which would mean that the lessor would have to take on an excess area,” says Daniel Adamiuk, the head of Jula’s Polish operations.

The future of DIY
Regardless of the problems faced by their competitors, those in the sector in a healthier position have bold plans. “We can expect a consolidation of the market as well as the resumed expansion of existing national and regional chains due to an improvement in the economic climate. However, any news about new chains entering the market has yet to be confirmed,” says Arnaud Boule. In 2014 Bricoman is planning to open two new outlets. A shop on ul. Grunwaldzka in Jaworzno is to come into operation in the middle of the year and another will be opened at the end of the year (the company has not revealed the location at this point). Bricoman is planning to open three stores per year over the next few years. Meanwhile, a new OBI outlet is to open in Ostrołęka, near Galeria Bursztynowa (in Q2 or Q3 of this year), while another is to be opened in Białystok near Galeria Kwadrat. “According to our research, the smaller formats, from 4,000 to 6,000 sqm – the usual area ranges from 10,000 to 11,000 sqm, such as with Castorama – have recently been developing more intensively, including Bricomarché and Bricoman. Why? The market in the largest Polish cities is already saturated with retail space from the DIY segment. Looking for new ways to market their products, brands are entering smaller towns and adjusting the scale and format of their stores to the local needs and possibilities. Good examples of such an expansion into smaller towns are the few recent openings of new Bricomarché shops in Ząbkowice Śląskie, Przeworsk and Braniewo,” explains Mariusz Czerwiak, the director of the retail leasing department at Jones Lang LaSalle.

Poland is only a testing ground
Swedish company Jula will also be focusing on growth. “We are at the stage of taking a breather after a very intensive period in the first two years of our presence in Poland. We celebrated this in November last year by opening our tenth outlet. The plan is still the same – to develop in Poland as fast as we can. We will soon open an outlet in Szczecin. However, we want to focus on the quality of the available locations. We are continuing to look for areas in large cities, with populations of over 200,000,” claims Daniel Adamiuk. It is also possible that the company will continue to work with IKEA. The first three stores opened by Jula in Poland are located in former Electroworld outlets next to IKEA centres. “Developers are eager to sign leasing contracts with chains that offer construction and interior design products for a number of reasons – the first and most important being their interest in extending the offer of the particular retail facility. A DIY tenant provides a lot of added value, it complements the grocery and fashion offer, and has a lot of potential in terms of attracting new customers,” says Mariusz Czerwiak of Jones Lang LaSalle. Jula also wants to locate its stores in city centres. “For example in Warsaw we can see the opportunity to open a minimum of two shops, such as in the Wola and Praga Południe districts. We are carefully monitoring the capital city’s market all the time. Other metropolises such as Kraków, Wrocław and Poznań could also easily absorb more than one Jula multimarket. It seems that we have a chance to eventually be present in all the towns in Poland with 100,000 inhabitants, and there are app. 40 of them. Thus we could soon operate more than 50 stores here,” says Daniel Adamiuk. Outside Poland, Jula shops currently operate in Sweden and Norway, where there are a total of 49 stores. Norway was the first foreign market the chain entered. However, its expansion plans go further. “Jula has global aspirations, just like other excellent Swedish brands, such as IKEA and H&M. Poland is the first and a very important stage in this plan. To quote the classic song: if we can make it there, we’ll make it anywhere. Our expansion possibilities in Sweden and Norway have been shrinking – there is space there for a few new outlets at the most. On the other hand, our business model is working really well, so we are being forced to grow. We do not have any precise directions for the next stages of this and only the sky is the limit to what we can do,” concludes Daniel Adamiuk of Jula Poland.