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Poland: COVID catipulates discounters further forward

Discount Retail Chains have been the first choice for Poles for years. They are close to the customer, have a wide offer, attractive prices, and have a significantly improved purchasing experience. In the times of COVID-19, the discount format could even create a further distance competitors. Will the specter of the economic crisis strengthen their position?

Discounters are, next to the e-commerce channel and convenience stores, the "beneficiary" of the coronavirus. Their share in the sales value of food products in Poland is still growing, according to Nielsen data. From February to May, discounters increased their share in this category from 36%. up to 40 percent

Stimulate consumption

After the July whiff of optimism related to the positive indicators of retail sales, August cooled down the moods. Poles spend their zloty more carefully. This could be a big opportunity for discount formats. 'Retail sales in July showed that Poland is returning to the path of much-anticipated V-shaped economic recovery. However, August sales results are below forecasts and did not confirm the previous expectations regarding the recovery of the trend. Looking for positive sides, they certainly include the increase in retail sales in several important categories related to the everyday needs of consumers', says Ewa Białek, director of the department of trade and manufacturing and food industry at DNB Bank Polska.

In their latest report, Allianz Research and the Economic Research Department of Euler Hermes point out that retail sales are not consumption, but the rebound in consumption is not permanent and does not simply aim to restore the pre-crisis situation.

According to the authors of the report, the rebound in activity seen in many consumption-driven sectors is likely to be short-lived. In particular, companies from the retail sector should not expect a full and lasting improvement in the level of sales. The increase in sales that followed the lockdown will gradually fade away and consumers will begin to feel the unpleasant effects of rising unemployment. Meanwhile, profit margins will continue to be influenced by price pressures as well as the additional costs of running stores during a severe health crisis.

The situation of all sectors will depend on the scale of the reduction of economic activity in the event of a prolonged coronavirus epidemic. Most sectors return to normal slower or faster, believes Piotr Bujak, chief economist of PKO BP.

In his opinion, the protracted pandemic may increase consumer fears of losing a job or lowering wages and prompting to cut expenses. The position of discounters offering food and non-food products at promotional prices will strengthen, the expert predicts.

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