We recently examined the challenges and opportunities of retailers positioned in the Southern Hemisphere. This week, the focus has shifted to unearth the possibilities on the other side of the globe. Discover retail’s new promise lands across central and eastern European countries (CEECs).
First things first. Entering new turf is easier said than done. Retailers need to educate themselves on geopolitical climates, currency complexities and cultural differences. Not to mention the tastes of your new consumer group. While fashion trends can translate globally, what works well for your UK customer may not always hit the mark in Hungary.
This is where real-time data analytics comes into play. The EDITED Market Intelligence platform allows you to understand the nuances of international markets, helping to make the right decisions for that customer.
Keep reading to elevate your business above your competitors who are also vying for market share in these untapped regions.
The regions defined
Before we get to the good stuff, let’s define the markets we are talking about. If you Google “Eastern European Countries,” you’ll find a few different results. Britannica and Wikipedia define countries such as Poland, Czech Republic, Romania, Hungary, etc. as “Central Europe.” However, the United Nations Statistic Division alongside countless travel websites put them in the “Eastern Europe” bucket. For the sake of this article, we will be using Central and Eastern Europe Countries (CEECs), which Wikipedia defines as an all-encompassing term for countries in Central Europe, the Baltics, Eastern Europe and Southeast Europe (the Balkans) that are usually former communist states. As this covers a lot of ground, we will only be focusing on a few key regions.
Want some insight into a market not included in this article? Get in touch today to find out more.
Why these markets?
H&M may operate in over 80 countries, but that doesn’t mean it’s totally cornered the market. CEECs provide ample opportunity for retailers to make their mark, especially with some of the big names pulling out due to COVID. The Swedish fast fashion giant is to cull 250 stores worldwide, which will no doubt see smaller regions impacted. In June, Inditex said it would shutter up to 1,200 of its smaller stores within two years, where a significant portion of its Zara and Pull&Bear outlets will close in Europe. French retailer Camaieu closed 27 stores in the Czech Republic and 25 in Poland. While this will allow native retailers to concentrate on serving their home customers it also encourages new blood. A fresh presence can work as a palate cleanser to local brands to win over a demographic by offering a differentiated assortment. New players can also test the water through physical stores with less pressure from other international competitors.
In terms of COVID, some of these CEECs are in the recovery position too. In July 2020, retail sales returned to growth in the Czech Republic, Hungary and Poland with the latter poised to be the EU’s most resilient economy. The European Bank for Reconstruction and Development expects a 3% growth for Poland by the end of 2021, which will make it the only EU member to return to pre-pandemic levels (pending the impact of Europe’s third-wave).
Now you know why you shouldn’t discount these regions. Here’s how you can tap into them.
Keep it omni
COVID further challenged the already-endangered future of brick-and-mortar retail. Savvy retailers bolstered their ecommerce investments to offset the high operating costs of spaces forced to close over 2020. However, CEECs make a case in favor of physical stores, certifying an omnichannel approach as a risk-averse strategy to penetrate these markets.
According to the Polish Global Consumer Insights Survey 2020 by PwC, 33% of respondents mainly shopped online for footwear and clothing during the pandemic while 43% mainly shopped in store. This indicates the consumer’s traditional retail mindset, even in the face of global disruption. These sentiments are echoed by Przemysław Lutkiewicz, LPP’s Deputy Chief Executive, who stated in an interview with Reuters that CEEC consumers prefer in store shopping.
The key is finding a balance. Despite some retailers shutting up shop, Zalando clocked Poland’s potential and expanded its reach. Last year, it added Poland to its Connected Retail program, allowing local brick-and-mortar stores to sync their stock and sell it via its online platform.
CEEC consumers may be lagging behind other regions in digital shopping, but don’t think of sleeping on your ecommerce offering.
According to Eurostart, consumers in the Czech Republic are ranked as some of the most frequent and avid shoppers with 80% of users purchasing goods and services, higher than its neighbors in Poland (72%), Hungary (70%) and Slovakia (68%). Fewer than 50% of Bulgarian and Romanian Internet users shopped online last year.
However, this is rapidly changing. These markets recorded the largest increases over the past five years.
As the CEEC space becomes more crowded online, retailers need to outfox their competition by nailing its pricing architecture.
Be conscious of price
CEEC consumers are hailed as some of the most price sensitive in the world and COVID has only accelerated the need for entry-level items. One-third of consumers in the Czech Republic and Poland noted a drop in income during the pandemic.
If we analyze new womenswear fast fashion products arriving and selling out of majority SKUs at full price since the start of 2021 across CEECs compared to the UK, we can see the type of categories snaring consumers attention.
The charts may show similarities - tops, bottoms and dresses are the top-performing styles. Yet on closer inspection, outerwear, which traditionally generates a high price point, makes up a greater proportion of new season sell outs in the UK compared to CEECs. On the flip side, CEECs sell outs across categories that carry more purse-friendly products outpace the UK. Accessories are 6.1% of sell outs in the Czech Republic, 5.3% in Romania and 5.2% in Poland vs. 4% in the UK. Underwear sell outs in Romania are on par with the UK at 4.3%, while hosiery experienced a stronger performance in CEECs.
The analysis of menswear products displayed similar findings with accessories sell outs the strongest in Romania, equalling 6.6% of the total assortment, followed by the Czech Republic at 5.6%, Hungary at 5.5% andPoland at 5.2% compared to the UK at 3.9%. In Hungary, hosiery sell outs outpaced its neighbors, making up 6.6% of sell outs, compared to 6.2% in Poland, 5.1% in Romania and then 3.8% in the UK.
This information can be wielded to understand what top-level categories are working in new markets and where there is opportunity to invest. And it doesn’t stop there. The EDITED Market Intelligence can go deeper to uncover where the most successful products were priced. For example, the majority of sunglasses that sold out in the UK were advertised between the £15-20 price point. In Poland, the sweet spot was under £15.00 (78 PLN).
Despite the price sensitivity, discounting isn’t any steeper. Poland and the Czech Republic are aligned to the UK with 23% of women’s apparel across the mass market currently advertised as reduced at an average reduction of 43%. The discounting depth in Hungary is also 43%, yet less products are marked down - only 19% of the range. Romania is offering the most conservative discounts with 11% of the range reduced and an average discount depth of 40%.
These stats further back up the need to use data to get your product and pricing on point. This way you won’t eat into margins trying to entice CEEC consumers with discounted stock.
Lead with sportswear
Knowing the tastes of your new target markets are half the battle. Luckily, data can be your friend again here, giving you real-time insights to enhance your own internal and external research.
Here’s a look at what’s working in CEECs.
Sports and activewear stand out as a key category. In Poland, spending on sporting products and services saw a 40% increase last year, which was mainly driven by the 18−24 age group. For Romania, revenue across these segments is projected to reach USD $79mm this year. EDITED data validates its success, with activewear making up 18% of new products selling out at full price since the start of the year across CEECs. Footwear is the top selling product across each market except for in the Czech Republic, where it's tops. Also in Poland, tops for men are currently outpacing sneakers.
A similar trend swept other countries suggesting a return to pre-pandemic dressing. Blouses equalled 27% of top sell outs in Poland compared to hoodies and sweatshirts - both which were less than 3%.
Dresses were the second top-moving category in this market with summer floral styles seeing success. Midi and mini silhouettes were favored in Romania, while shirt and jersey styles were popular in the Czech Republic.
In Poland, face masks are an essential item that preceded pandemic times due to the region's high smog levels, ranking it as the European country with the lowest air quality. While usually associated with winter, anti-dust and pollution masks are a year-round essential in this market.
Cater to Gen Z
The preference for in store purchasing behavior may be reflective of an older, more traditional generation. Many younger consumers left their CEEC homes to travel or find work abroad with better wages. However, Brexit and COVID has led to locals returning home en masse. Combined with Gen Z consumers currently restricted with travel, there’s an opportunity for brands to create a narrative to this consumer who is hungry for international dialogue.
Additionally, with Gen Z the ultimate tastemakers, influence can be projected outside of CEEC, much like how Scandi style has resonated globally. Reserved’s latest collection RE.DESIGN is a glimpse into what Poland’s cool kids are wearing. Advertised as “curated by Polish Gen Z,” 12 local creatives were tapped to build the collection and front the campaign underpinned by the theme of authenticity.
When designers like Gosha Rubchinskiy and Demna Gvasalia entered fashion’s mainstream in the mid-noughties, they brought the post-Soviet aesthetic with them. This look was characterized by babushka scarves, 90s nostalgia, gender-fluid tracksuits, vintage tees with Cyrillic slogans and the high-low styling of mixing sportswear brands with luxury designers.
With the aesthetic resonating across CEECs, many of these trends are still relevant amongst Gen Z today. Many more CEEC designers have emerged into the mainstream such as Anton Belinskiy, Chylak, Ancuta Sarca and Gnana Studio who are redefining the perception of CEEC fashion to include elements of refinement, avant-garde and sustainability. The post-Soviet look has evolved beyond the working-class gopnik subculture, which has become a meme and a stereotype for Russians and other CEEC nationalities.
Last year, #postsovietaesthetic went TikTok viral, set against the scenescape of “Судно (Sudno)” by Belarusian band Molchat Doma. It featured industrial buildings or abandoned parks with teens displaying a yearning for “Soviet vibes.” Many younger CEEC users have been quick to criticize the trend of romanticizing the communist era.
As with entering into any new space, it's crucial to include representation of this nationality within your decision-making across product development and marketing, while being mindful to avoid cultural appropriation.
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