Shopping for cooked frogs

There has been only one trading Sunday each month in Poland since the beginning of this year. In that short time, the impact has been significant on both the shopping centre sector and their customers. The Retail Institute and more than 120 Polish shopping centres have been carrying out footfall and turnover studies since September 2016. The Institute has also specifically analysed the results of shopping centres and chains in Q1 2019, focusing mostly on the revenues of fashion retailers, who make up more than half of the leasable space of ​​shopping centres in Poland. While the tenants of large shopping centres recorded an average 1.8 pct increase in turnover in the period compared to Q1 2018, the tenants of medium- and smaller shopping centres have had to contend with declining sales. For medium-sized centres the decrease amounted to 1.6 pct, while small centres suffered an average turnover decrease of 7.4 pct. “Large and very large centres with more than 40,000 sqm of leasable space have been able to make up for their losses,” confirms Anna Szmeja, the CEO of the Retail Institute.

After the shock therapy of the gradual limitation of Sunday shopping, which began in 2018, the market situation has been more stable, at least for the largest players. The average revenue of tenants of large shopping centres increased by 1.8 pct y-o-y in Q1 2019. The footfall in these centres grew by 2.2 pct in the same period, while the average turnover per leasable sqm was PLN 10.5 higher for large centres, coming in at PLN 763.5. However, the results of large centres are the only positives. Medium-sized malls (from 20,000 sqm to 39,999 sqm) and the smallest centres (from 5,000 sqm to 19,999 sqm) have not been faring so well. The results of all tenants of medium-sized centres decreased by 1.6 pct y-o-y. The footfall in such centres fell by 1.8 pct in the same period. The average turnover per sqm was PLN 11.8 lower than in Q1 2018, coming in at PLN 714.3. However, it is the performance of the smallest centres that has been giving the most grounds for concern. According to the Retail Institute, the revenues of tenants of small centres fell on average by 7.4 pct in Q1 compared to the same period of 2018, while the average turnover per sqm was PLN 47.8 lower. The footfall in these centres fell by 4.8 pct over the same period points out Anna Szmeja. “Newsagents, books, music, multimedia, games and gifts retailers have all had to bear this negative impact in all shopping centres. The revenues of retailers in these categories has been reduced mainly in small centres – by PLN 122 per sqm per month in Q1 compared to the same period of 2018. The turnover for small centres is between 24 pct and 29 pct lower for this category compared that that of medium and large shopping centres,” emphasises Anna Szmeja.

So how are consumers reacting to this phenomenon? “There has been a shake-up in the structure of the daily footfall. Shopping centres are more frequently visited at the end and beginning of the week. Apparently the need to go the mall has not diminished, but customers have had to forgo their Sunday shopping trips. The introduction of the Sunday trading ban has also given a boost to e-commerce and weakened the sales of brick-and-mortar stores. It has also contributed to the unfair treatment of a number of retailers due to false interpretations of the regulations,” argues Leszek Sikora, the managing director of shopping centre developer and manager ECE Projektmanagement Polska.

“The ban on Sunday trading is a disadvantage for all those who operate their businesses in shopping centres, including the food and beverages segment. For some, such as ice cream parlours and cafés, Sundays were the most important days from the point of view of turnover and these losses are impossible to make up for,” claims Tomasz Jagiełło, the CEO of Polish cinema operator Helios.



“Shopping centres are now recording worse results in the food products segment than stand-alone stores,” points out

Gregorz Mroczek, deputy CEO of CREAM

2018, 2019, 2020... the countdown continues

The ban on Sunday shopping introduced a year and a half ago had a dramatic effect on the behaviour of customers, while forcing a reaction from managers, owners and retail chains. “The ban on Sunday trading has been like cooking a frog. When we throw a frog into boiling water, it will immediately jump out of the pot. However, when we put it in lukewarm water and slowly increase the temperature, the frog doesn’t notice the difference and is oblivious to the fact that it is being cooked. Unfortunately, this is very much what has been happening to the retail sector. The introduction of a total ban on Sunday trading would have soon led to the collapse of many retailers and would also have been met with opposition from a large section of society. The gradual imposition of trade restrictions was undoubtedly a better option than imposing them immediately. Unfortunately, this does not change the fact that not enough time was given before the whole process for companies to prepare for the changes – and our frog is now slowly cooking,” warns Anna Szmeja.

The gradual introduction of Sunday trading ban was intended to make it easier for consumers to get used to being unable to shop on Sunday. However, it has led to a great deal of confusion because they are not sure on which Sundays the shops are open, so they usually do all their shopping on Saturdays just in case. This theory is confirmed by Justyna Kur, a deputy CEO and the director of property management at Apsys Polska. “Customers are still not sure on which Sunday the centre will be open – they often plan their Sunday shopping only to realise at the last minute that the shops are closed. Or they decide not to do any shopping on Sundays at all. Despite the fact that another year has passed since the introduction of the changes, not all consumers are sure on which Sunday of the month trading can take place or they don’t realise that some centres are open to a limited extent,” admits Justyna Kur. According to Strefa Biznesu, the ‘shopping Sunday’ slogan has been appearing every weekend (Friday and Saturday) in the top ten most popular internet search phrases for more than a year, which best illustrates the confusion that still surrounds this issue.

However, some players on the retail market have seen this as an opportunity. Grzegorz Mroczek, a deputy CEO of shopping centre developer and manager CREAM, admits that the biggest winners in this situation are food discount stores. “With their huge marketing budgets, they have quickly been able to get customers to switch to Saturday and Monday purchases. At the same time, they no longer have to bear the costs of Sunday logistics and employee costs. As a result of the changes introduced, shopping centres have recorded worse results in the food products segment than stand-alone stores,” emphasises Grzegorz Mroczek, a deputy CEO of CREAM.

And after the frog has been cooked?

While the Sunday trading ban has been detrimental to businesses operating in shopping centres, it should be noted that it has had a positive effect on the variety of their product range. The owners of such buildings have become much more interested in providing an attractive range of entertainment and eateries as well as attractions to draw customers in on non-trade Sundays. “We hope that the trend we are currently seeing in malls will to some extent minimise the negative effect of retail-free days since the cinema is usually the main point on a shopping centre’s entertainment map – as is also the case with those located in smaller towns, where we are eager to open modern four-screen cinemas adapted to local requirements. Consumers have already learnt that cinemas can operate independently of the trade ban and so ticket sales have returned to normal on that day. The situation is different with food and drinks operators in shopping centres, which is why restaurants are having to come up with incentives to draw customers in – for example, the family promotions with cheaper children’s meals at Papa Diego on Saturday and Sunday. Fortunately, we were in a good situation because we already knew about the Sunday trading ban when we decided to launch our catering business and so we were able to factor in its impact on our business,” explains Tomasz Jagiełło of Helios. Shopping centre developer and manager EPP also treated non-retail Sundays as a challenge as well as an opportunity to introduce new features to its buildings. The company has embarked on introducing social activities programmes in its shopping centres. “It has turned out that malls are also great as places for non-commercial events, that is, social, educational and cultural activities. So far, we have held dozens of events of a very diverse nature in cooperation with many different institutions. We have had board game tournaments, vinyl disc exchanges, sports club presentations, health promotions, NGO reviews, retro gaming, painting exhibitions, performances, concerts, art workshops, bike festivals and even patriotic meetings all take place in our centres. We have also managed to overcome the initial distrust of institutions and organisations over cooperating in this way with a commercial partner, as this was a novelty to some of them and they needed some getting used to the idea,” insists Wojciech Gepner, the community director of EPP.

Life abhors a vacuum. And retail is no exception to this. The new situation was greeted with an immediate response as the Sunday shopping void was filled with greater entertainment and food and drink provision. However, not every centre is suited to this approach. This is an issue that has to be considered individually depending on each centre. In cases where the number of units free from Sunday trade restrictions is negligible, opening the building is certainly neither worthwhile nor economically justified. The situation is different when it comes to a shopping centre that offers a wide range of leisure activities, including an extensive restaurant area and/or entertainment. In such cases, opening the building on Sunday makes perfect sense. “There are also malls that can be categorised as ‘experience destinations’, which are teeming with life regardless of the day of the week or the legal restrictions. One such example is Manufaktura in Łódź, which plays an important social role in its city. In this type of centre we are undertaking more activities aimed at a specific community, such as organising regular events and expanding the gastronomic and entertainment range. We want to guarantee our customers a positive shopping experience and a wide range of entertainment. A new word has already been coined for this – retail-tainment, which fully reflects the direction the shopping centre business is taking,” points out Justyna Kur.

“The Sunday trading ban has given a boost to e-commerce and weakened the sales of brick-and-mortar stores,” says Leszek Sikora, managing director of ECE Projektmanagement Polska

Total ban around the corner

From January 2020, shopping centres’ doors will remain closed almost every Sunday. Little will change in terms of their operational activity itself. Owners, tenants and employees are busy adapting to the new reality, and customers are being informed about the precise days and opening hours of the building. A total trade ban will certainly change consumer behaviour.

“We are already seeing increased customer activity on the few retail Sundays that remain in the year. We expect that the total trade restriction to six days a week will have a negative impact on footfall and tenants’ revenues, despite the extended opening hours on other days. Online shopping will meanwhile continue to strengthen and develop. The trade restrictions could lead some tenants deciding to withdraw from shopping centres completely. This can already be seen with Grycan, which operates most of its ice-cream parlours in shopping centres. For many of these, Sunday was the most profitable day of the week and they have become unprofitable due to the trade restrictions, which is why the company is considering pulling out of shopping centres. This would be a great loss for the sector and, above all, for customers. We should expect similar decisions to be taken by other tenants – and this problem could become significant from the perspective of the entire market,” believes Justyna Kur.

Anna Szmeja is also looking to the future with mounting concern. Inflation is rising, turnover is falling, margins are shrinking and business costs are going up. The pace of development has slowed down as a result. “Many tenants are openly saying that the Sunday trading ban has accelerated the optimisation processes of a number of retail and service chains across the country. Such closures, however, are generally spread out over time and so we will only be able to see the full effects in two or three years’ time. If this process overlaps with another financial crisis, the market may find itself faced with a massive slump,” stresses Anna Szmeja.


Tomasz Jagiełło, Helios

How different tenant categories in centres of different sizes are coping with the ban

Large shopping centres (above 40,000 sqm)

Fashion retailers, which make up 56.3 pct of the leasable space in large centres, recorded a 2 pct y-o-y increase in turnover in Q1. Revenue in the following segments all had a positive impact on the index: mixed fashion (+4.6 pct), footwear (+2.4 pct), women’s fashion (+2.2 pct), fashion and sporting goods (+3.7 pct), health and beauty (+4.8 pct), cafés and restaurants (+16.3 pct) and electronics (+0.3 pct). On the other hand, the index was negatively impacted by: entertainment (-1.3 pct), specialised grocery stores (-1.3 pct), as well as interior design, home and garden (-4.6 pct).

Medium-sized centres (above 20,000 and up to 39,999 sqm)

Fashion retailers, which account for 56.7 pct of the leasable space, recorded a 4.1 pct turnover increase in the same period to PLN 547 per sqm. The two largest segments had a positive impact on the overall turnover index: mixed fashion (+ 6.1 pct) and entertainment (+2.6 pct). Footwear (+7.7 pct), fashion and sporting goods (+10.7 pct), interior design, home and garden (+1.5 pct), cafes and restaurants (+2.9 pct) also had a significant influence on the data. The turnover index was, however, negatively impacted mainly by declines in the results of specialist grocery stores (-15.3 pct) and women’s fashion (-0.4 pct) as well as health and beauty tenants (-4.9 pct) and electronics (-3.9 pct).

Small shopping centres (from 5,000 to 19,999 sqm)

Fashion retailers, which account for 52.8 pct of the leasable area, recorded a 3.8 pct decline in Q1 2019. The three largest segments also had a negative impact on the index: mixed fashion (-6.6 pct), entertainment (-5.3 pct) and specialised grocery stores (-16.8 pct). Electronics goods also recorded decreases (-2.4 pct).

Source: Retail Institute