Shopping close to home

The first hypermarket to open in Poland was an Auchan store in Piaseczno outside Warsaw in 1996. From the very moment that large-format retail appeared small local shops, greengrocers and street markets started to disappear. Now, however, this trend has gone into reverse

For the last few years, small shops where the basic necessities can be bought have been back in favour. Despite offering lower the prices, large retail chains have failed to eliminate local retail. According to research by the Polish Trade and Distribution Organisation, nearly 60 pct of the market is accounted for by shops backed by Polish capital, whereas only 40 pct is held by foreign chains. The potential of this market is being increasingly appreciated by retail developers who are looking for new niches. "Investment in convenience facilities, in particular those with areas of less than 5,000 sqm, is a great idea not just for both new players on the market and experienced developers. A neighbourhood centre would have a simpler commercialisation process that only requires attracting a few tenants to a given location rather than several dozen," claims Karina Kreja, associate director of CBRE. "Our company has a lot of experience in setting up retail chains. We have established three big nationwide projects: Eurocash, Biedronka and Żabka. This experience and the fact that we sold the last of these, the Żabka network, has led us to come up with the idea to establish a chain of facilities with space for retail operators. We carried out 2.5 years of market research before developing the Czerwona Torebka [Red Bag] concept. Similar chains already exist, for example in the USA, but we had to adjust the project to the Polish situation. In our opinion the fastest growing retail facilities are currently speciality stores," says Ireneusz Kazimierczyk, president of the management board of Czerwona Torebka, who is planning to open as many as 1,950 Czerwona Torebkas - small shopping centres located in big residential estates, near traffic routes and in important retail and service areas in medium-sized towns. Despite the fact that a centre with an area of app. 1,800 sqm is planned for Warsaw's Targówek district, the project will mainly focus on smaller centres. The first Czerwona Torebka was opened in July earlier this year in Żory. It is worth mentioning that the developer is already planning to build another in this town. "We are not afraid of investing in small towns. Our 20-year history has shown that after the transformation into a free-market economy, Poland is still a country where districts - powiats - continue to have a very strong position. There are currently 6 mln consumers living in towns of 30,000 to 100,000 inhabitants. Existing chains and large-format stores have not won the battle against small trade. Our idea is shops for quick, convenient shopping," adds Ireneusz Kazimierczyk. His company currently has 70 facilities at various stages of development with 40 of these to be opened by the end of the year.

How is this possible?
The question that arises is how to build so many retail facilities in such a short period of time. This is now possible thanks to technology such as the manufacture of light steel modules to construct the buildings, which has been imported from New Zealand. Each of the ?cubes' will have an area of 60 sqm and can be connected in such a way that tenants will have the option of leasing larger areas. The projects will consist of a maximum of 25-30 modules. Enough cubes can be produced to build one shopping centre in the course of one evening, while the assembly of the modules takes app. two weeks. Projects of this type do not require large plots of land, either. Whereas in the case of a traditional facility a plot of land with an area of 5,000 sqm is the absolute minimum, 3,000 sqm plots are big enough for Czerwona Torebka centres, and these could be built on the land left over after the construction of a residential estate. Apart from the unique structure of the buildings, the developer also wants to introduce a new system for leasing the space within the building. "Our offer is directed to everyone - both single shops and tenants who want to create chains. We are trying to select ?a bouquet of tenants' in such a way to enable local entrepreneurs who run, for example, butchers' shops, which have been present on the local market for a long time and are recognised locally, to find space for themselves. The project is also aimed at companies who run franchise chains and companies that are looking to create large chains of local shops in order to become market leaders in the future," claims Ireneusz Kazimierczyk. The company has already signed several contracts with parties who want to create at least 10 shops within this platform. The Poznań-based Flora 3000 chain of florists has signed a lease contract for space in as many as 46 facilities located all over the country. Contracts for the development of chains with this structure have also been signed by Małpka Café, which combines a café, a cake shop and a bakers' shop, as well as representatives of butchers shops such as Staropolskie Wędliny, Confis, Janeta and Mix Electronics. The company behind Czerwona Torebka assures the rent rates offered by these centres are much lower than in traditional shops, due to the lack of shared areas in the facilities.
"The expansion of our chain is to cover the whole country. If someone wants to be number one in their field they can achieve this within two or three years because we are able to open 400 such outlets over this period," asserts Ireneusz Kazimierczyk. However, Karina Kreja of CBRE has doubts over whether a small shopping centre will be able to accommodate local entrepreneurs. "If we are talking about projects that belong to institutional entities, they tend to commercialise their projects while planning to possibly sell them in the future. There will not be a lot of space for local initiatives of this type because professional developers will adhere to the 80:20 principle, allocating less than 20 pct of the leasable area to poorly recognised brands and independent entities. In such small projects two or three shops will be occupied by local, unrecognised brands," claims Ms Kreja.

The competition does not sleep
Dekada Group (which operated under the name of the Foren Group until recently) is also planning to create a chain of convenience shopping centres. There are, however, a few basic differences between these projects. The first is the scale. The eventual number of Dekada centres is to amount to at least ten, located in towns with catchment areas of app. 40,000-50,000 inhabitants, while their areas are to come to as much as 10,000 sqm. The centres will be built according to traditional methods, which of course requires a longer construction process. Dekada also has a different approach to the tenant mix. Big chains such as Tesco, Rossmann, Empik or CCC are to dominate. In spite of the fact that rents will be at least 30 pct lower than in traditional facilities, the president of the company harbours no illusions about attracting local entrepreneurs. "The footfall on shopping streets has been diminishing for a few years, which is a problem for small shops. All the same they cannot afford to pay the rent in a shopping centre and are scared that moving the business will not work," asserts Aleksander Walczak, president of the management board of Dekada Realty. Dekada centres have already been opened in Myślenice and Skierniewice, with seven more soon to open across Poland.

Zuzanna Wiak