CEE Promising environment for luxury retailers

The CEE region has arguably been one of the most dynamically developing in the world, which has given birth to a growing middle class, as well as some ultra-wealthy. The rapid development is accompanied by a strong increase in aspirations for a Western standard of living, a trend that is particularly evident among consumers during business and tourist travels.

According to Eurostat’s 2022 data on disposable income in the CEE-6, one needs an annual income between EUR 18,000 in Romania and nearly EUR 38,000 in Czechia to be in the top 1 pct. In contrast, the affluent in Germany, France, and the Netherlands earn around EUR 90,000 annually, while in Spain, the benchmark is EUR 60,000. The entry point into the wealthiest 10 pct or 20 pct in some Western European countries is comparable to the top 1 pct in certain CEE countries.
Silviu Pop, director of Research, Romania & CEE

While the data may initially seem unpromising, it's important to consider the historical context: Western Europe has had decades more capital accumulation than the CEE countries, which were hindered by communism until 1989. However, the CEE-6 is rapidly catching up. Between 2005 and 2022, the income threshold for the top 1 pct more than doubled in all CEE-6 countries, with Bulgaria's increase nearly sixfold. In contrast, countries like Spain, France, Germany, and the Netherlands saw increases of only 55 pct to 67 pct, less than half the growth rate of most CEE-6 countries.

There are many reasons to be optimistic about income growth in the CEE, particularly at the higher end, which benefits luxury retailers. While local purchasing power has been a focus, international travel is also improving. Although CEE countries can't yet compete with global luxury hotspots, their less crowded markets offer higher margins for retailers, as data supports.
Dominika Jędrak, director of Research & Consultancy, Poland & CEE at Colliers

The report provides an analysis of 179 brands, which were categorised into three groups: supreme luxury and aspirational luxury, accessible luxury and premium brands.

The analysis shows that luxury and premium brands have most often chosen the Czech market, ahead of the Polish one. It is especially visible in the number of the supreme luxury brands, where almost 80 pct of them were active in Poland, Czech Republic as well as Romania. In Poland and Romania brands appear mostly in multi‑brands, while Czech market sees a higher presence in own stores.

The Czech Republic stands out as the most mature market for luxury brands in the CEE region. With a well-developed retail infrastructure, Prague has become a hub for high-end fashion and luxury goods. Poland and Hungary can be considered developing markets with excellent growth prospects for luxury brands. Initially, luxury brands entered these markets through multi-brand stores and partnerships. Following successful performance in these formats, many brands are now looking to open their own stores to capitalise on the increasing demand. Romania’s luxury market is characterised predominantly by multi-brand stores and partner shops. Slovakia and Bulgaria are in the early stages of developing the market.

The last 10 to 15 years have been favorable for luxury retail in CEE. With rising disposable income, lower living costs, and rapid economic growth in the CEE-6, combined with a strong desire for a Western lifestyle, the next decade should be even more promising if current trends continue.
Dominika Jędrak, director of Research & Consultancy, Poland & CEE at Colliers