Sunday, bloody Sunday

The die has now been cast – by the Polish government. On November 24th 2017, the Seym, the lower house of the Polish parliament, passed a bill to restrict Sunday trading. A total of 254 MPs voted for the new legislation, 156 were against it and 23 abstained. The bill was then referred to the Senate in mid-December, which approved it with only some minor amendments. It now only requires signing off by the President. According to the new law, from March 1st 2018 it will only be possible for retailers to trade on two Sundays per month, which will be reduced to just one Sunday in 2019 before being banned completely in 2020 – with only a handful of exceptions. The ban will not apply to bakeries, patisseries, ice cream parlours or online stores (and due to this the law did not require the sanction of the European Commission). Furthermore, the new law introduces limitations on the construction of shops and other retail facilities at bus and train stations.

The great unknown

The vast majority of retail organisations have responded negatively to the changes being introduced, stressing its potentially harmful economic consequences, the haste at which it was passed, the loopholes in the new law and, as a result, the dubious quality of the new regulations. “Since the beginning of the bill’s legislative process, the Polish Council of Shopping Centres took the view that a ban on Sunday trade was not in the best interest of any of the parties concerned. The ban on trade and employment in this sector accompanied by the lack of precise provisions in the act will certainly cause havoc for customers and in the retail and service sector as a whole,” claims Radosław Knap, the director general of the Polish Council of Shopping Centres. The shopping centre segment will bear the brunt of the changes, as it the main target of the new law. “Closing shops on Sundays will affect everyone in the retail sector. Tenants will have lower turnovers. Shopping centre owners are already preparing themselves for moves by tenants to insist on changes to their contracts due to the reduction of the number of trading days. The service companies that work for retail facilities will also have to ready themselves. Perhaps they will have to renegotiate their rates and reduce their staffing levels. Everyone will have to bear the consequences of the ban – and it will not be a change for the better,” remarks Szymon Łukasik, the head of tenant representation at Cresa Polska. However, everyone does seem to have come to the conclusion that now is no longer the time for complaining but for preparing for the upcoming changes. The problem is, it’s difficult to say exactly what they need to do. “We will need a few months to determine whether such approaches as extending the opening hours on other days makes any sense. At the moment all we know for sure is that closing a shopping centre on Sundays will only mean slightly reduced costs for us as the owner – since we pay real estate tax regardless of whether the centre is open or not, while the fees charged by our service companies will not differ significantly. So our turnover-based revenue will probably decline,” explains Agnieszka Muż, a senior asset manager at CPI Property Group, which is the owner of the Ogrody shopping centre in Elbląg.

Shopping food centre

The initial reduction in trading to two Sundays a month, which will begin on March 1st, will constitute a trial run for the total ban on Sunday shopping. Everyone is already wondering what strategies can be tried out during this period. Most shopping centre owners have declared that they will comply with the law. However, the provisions of the new law do provide loopholes for some retail chains as well as catering and entertainment operators. Shopping centres may also be able to exploit them. But would it be worth it? “The trading model in shopping malls is now up in the air. The list of more than 30 types of entity excluded from the ban includes those that are located in malls and they will potentially be able to continue operating their businesses. If only a few services are functioning out of, say, 100 tenants, such as the pharmacies, florists, souvenir shops, the post office and newsagents as well as a few restaurants and the cinema, the question will be how customers are going to react to such a peculiar mix of Sunday shopping. We need to take into consideration the fact that the footfall will change on Sundays when all the other stores, offering clothing, footwear, pharmacy goods, cosmetics, household appliances, audio/video equipment and home furnishing goods, which currently constitute over 85 pct of the space in Polish shopping centres, are closed,” points out Radosław Knap. Szymon Łukasik has similar reservations. “If a cinema operates in a shopping centre on Sunday, this is great because you can watch a film. But the nearby restaurants, or more generally, the restaurants in the mall, will not benefit from this because a food & beverages zone or a restaurant customer is not the same as a cinema customer. Gastronomy can only be partly transferred online and in modern shopping centres it has become much more popular and increasingly sophisticated. Even if caterers do open, their Sunday turnover will be much lower than previously, when the remaining retail section of the centre was open. The food zones that will be able to survive Sundays with the other shops closed are only going to be the extended and modernised ones, such as the area that has existed in Galeria Mokotów for a few years or the one that recently opened in Arkadia. Traditional food courts with a few gastronomy outlets, even of well-known, popular brands, do not stand a chance. Keeping them open on Sundays regardless could result in financial losses,” argues the head of retail tenant representation at Cresa. As a result, the owners of shopping centres will have to decide whether opening it for a few tenants is profitable. And they can only do this anyway as long as the tenants want to open their businesses under such conditions. “We are also wondering about such issues as the operations of catering tenants. From our conversations with the tenants we know that they are trying to come up with solutions that will limit the impact to their businesses as much as possible. We hope that we can together work out a cooperation model that will allow us to smooth out the most harmful consequences of the new law,” explains Elżbieta Kowalczyk, the director of property leasing and management at Dantex, which is developing Galeria Rondo Wiatraczna in Warsaw’s Praga Południe district. Its opening will coincide with the new act coming into force.

A rickety raft of changes

The legal regulations that will be introduced on March 1st will mark a new phase in the life of shopping centres. They will not only affect the food & beverages zones that could theoretically still operate in a mall. The new law will have an impact on many of the various aspects of modern retail operations throughout Poland and will be an added complication for a number of them. One such example is the functioning of the shops in or near bus and train stations and at integrated retail and transport hubs – and there are now many of these across the country. According to Radosław Knap, during a session of the Social Policy and Family Committee convened to discuss the amendments to the act, labour department minister Stanisław Szwed concluded that for Central Station in Warsaw only the shops located at the level of the ticket hall would be able to open, while those on levels -1 and 1 would not. “The bill that has been passed is very unclear in this respect. The exclusion of stores that are directly related to providing services for the passenger at stations is a genuine mystery for us, because those who drafted the bill have not been able to define this aspect with any clarity,” claims Radosław Knap. Furthermore, centres that are, as a rule, visited at weekends, such as outlet centres or large furniture stores, are inevitably going to suffer. “Admittedly there are only a small number of outlet centres on the Polish market, but they are very popular. They liven up at the weekend because they are usually far from the city centre and shopping there takes a long time. The footfall in outlet centres can be several times higher on Saturdays and Sundays than on weekdays. And the internet has nothing to do with this,” comments Szymon Łukasik. Another important issue is to design new centres in such a way that they fit into the new trading model as seamlessly as possible. “Now each entertainment and food area will have to be developed to constitute a section that is independent of the shopping mall – with its own entrance and the option of segregating it from the rest of the building. But the opening of such a section on Sundays might turn out to be unprofitable for many centres, which will as a result mean reducing the range of services available for people interested in going to the cinema or out for dinner,” cautions Agnieszka Muż. The new law also poses a challenge to managers in terms of how best to adapt their strategy and marketing for the new situation. “Restricting trade on Sundays is set to revolutionise the marketing of shopping centres. The lack of opportunities for holding events on Sundays – because nobody is going to open a centre just for an event if all the shops are closed – does not mean that these attractions will all be shifted to weekdays or Saturday. They will simply not take place at all. On Saturday, when there are many shoppers in the centre, such events are only a nuisance for them, which means that they cannot fulfil their main purpose of making the shopping more pleasant and offering an interesting and alternative way of spending your time. The activities will have to be designed to fit into this new reality, shifting the emphasis of such events onto communication with the customers, particularly when every second Sunday they will be prevented from trading. For many it will remain unclear for some time on what days their shopping centre will open,” adds Agnieszka Muż. She summarises the situation with one important observation: “However you slice it, the ban leads to limiting the availability of private–public space, that is, those areas generally perceived as public and available.”

Przemysław Gurban

operations director, Salony Agata

A headache for the furniture chains

The Sunday trading ban is such a new phenomenon that we still have no idea how it will affect the turnover of the furniture segment. Poles are still very eager to buy furniture in brick-and-mortar stores, such as chain stores, and so depriving them of the option of deciding when they can visit a shop will certainly affect them severely. Many people come Salony Agata in order to be inspired, to receive advice and to check how certain techniques work in reality. Customers mostly choose to come at the weekends when they have more time and can select their purchases in peace – particularly when it comes to furniture, which is an investment they make for several years. Furthermore, it’s worth pointing out that even though the number of Salony Agata stores has grown dramatically, many of the customers who are interested in our products still have to travel many miles in order to visit us. This is much more difficult during the week than at weekends.