Discount Variety Retail Chain Dealz (owned by Pepco) intend to open its 300th store in Poland, which means a radical acceleration of the company's development. "Our goal is to have over 1,000 stores in the next 4 years, not only in Poland, but also in several countries of Central and Eastern Europe", says Marcin Langowski, Managing Director of Dealz Poland in an interview with Retailnet.
2023 is a breakthrough year for Dealz due to two important circumstances: the company's fifth anniversary and the opening of the bicentennial store. In addition, the first distribution centre was launched this year. Could you talk about important events in the company and summarize five years of the network's activity on the Polish market?
As far as this year is concerned, it would be appropriate to start by referring to the external context, which, unfortunately, remains far from ideal and normal. The ongoing war in Ukraine and inflation (with no end in sight) pose a significant challenge for our customers, thus shaping the retail market. Dealz continues to implement its dynamic development strategy, which is already bringing many noticeable and positive effects. For example, in mid-February we opened a new distribution center in Łyszkowice, in the same month we introduced a new version of the store. In the second half of March, after less than five years of presence on the market, we opened our 200th store in Kłodzko. These are visible and concrete elements of our success.
I think it is also a great opportunity to thank all employees and my team for their commitment to building our Dealz brand, especially in the context of the 5th anniversary of the opening of the first store. Their contribution is invaluable, and visible in the form of satisfied and returning customers. It is thanks to them that Dealz can continue its dynamic development and increase its popularity.
So what are the plans for the development of the network in Poland?
First of all, we want to further strengthen integration within the group, taking advantage of its synergy, scale of impact and extensive experience, including m.in Pepco. Both brands have their headquarters in Poznań and we can already see the effects of this synergy, for example in the Property Department, which supports both Pepco and Dealz. This year we intend to open our 300th store in Poland, which means a radical acceleration of the company's development. Our goal is to have over a thousand stores in the next 4 years, not only in Poland, but also in several countries of Central and Eastern Europe. Next year we intend to enter new foreign markets. We are going here in a similar direction to Pepco.
It can be said that brands such as Pepco and Dealz are now in high demand due to the changing shopping habits of customers as a result of the pandemic and other problems such as inflation. Customers are now looking for networks that offer good prices, which definitely favours you.
Yes, definitely. There is a lot of interest in stores that offer good quality products and brands at affordable prices. This also applies to both Pepco and Dealz. During this period, it is especially attractive for customers who are looking for ways to shop cheaper without sacrificing quality. Of course, some of them also choose their own brands. However, the discount format is very popular both in good times and in difficult economic times. This is also confirmed by our very strong like-for-like result, which proves that customers are looking for bargains and are eager to choose our offer.
How long do you estimate this discount format will be successful?
Let us remember that the commercial format itself is the result of the evolution of customers' shopping behaviour, but also to a large extent generational changes. It is a concept that has bright prospects, while hypermarkets and larger stores are losing their importance. This only confirms that the direction of development we have chosen is the right one. Customers want to shop close to their place of residence, they are looking for affordable offers, good quality, so the proposals of Dealz and Pepco are the perfect solution. The outlook for the coming years looks very optimistic. The concept of stores like ours will continue to gain popularity and remain the future of commerce.
Polish market and development opportunities on it are changing dynamically. There are a lot of retail park and convenience center projects, but fewer or no traditional, large galleries are being built. How do you assess the availability of retail space in terms of the development of the Dealz chain of stores?
Currently, Dealz is developing in 3 retail formats, i.e. retail parks, large malls and shopping centers, presence in each of them works very well for us. Of course, the results and profitability of individual stores may vary slightly depending on the location chosen.
The market hates a vacuum, so we use locations that are already in the design phase or have been vacated by previous tenants. This allows us to effectively develop our business. The Dealz store is a "traffic driver" in every location.
How does your cooperation with retail landlords look like?
Landlords are aware of how strong Dealz's commercial offer is, how strong Pepco's offer is. These two brands generate very high customer traffic in shopping centers. We work as a group, so we no longer distinguish between those with the Dealz brand and Pepco. Our real estate team is tasked with leasing larger retail spaces for both brands, rather than separately for each brand. In this respect, the relationship and operation in certain commercial locations between Pepco and Dealz is strictly defined. Help from Pepco is very useful, especially where the Dealz store is not yet present, but Pepco is already there. We have a greater possibility of locating the second brand here.
When asking about tenant-landlord relations, it is impossible not to notice that the position of the Dealz brand has recently grown significantly. I have the impression that in the past you were not a very desirable tenant, especially in shopping centers where premium or fashion brands were the focus. Dealz and Pepco appeared primarily in retail parks.
Those times are long behind us. Awareness of both brands is currently very high. Both Dealz and Pepco are very desirable brands by customers and landlords. In addition, the new store concept is more modern, which translates into greater customer traffic, thanks to which we are much more attractive to landlords, including large shopping centers.
What is the most important for you when signing a lease agreement? Under what conditions would Pepco and Dealz like to sign lease agreements?
Of course, the decisive factors here are costs and location, which are key factors in our development. Lower rental costs translate directly into lower prices for the customer, and lower prices generate "traffic". This is a very simple mechanism.
The Dealz chain has recently presented a new visual concept of its stores. The changes include, among others, new branding, navigation and communication in stores, as well as new product lines. How will the stores change and what is the schedule of this rebranding?
The first new look was the Dealz store operating in Galeria Pestka in Poznań. The new concept can also be admired, m.in in Zamość, Kłodzko, Gorzów Wielkopolski and in all newly opened Dealz stores, which is natural and obvious. The rollout of the remaining facilities will take place in the first half of next year. Currently, we do not see the need to change the format or area of stores. We focus on developing product categories that are already strong at Dealz. We will also further strengthen the offer of articles for everyday use and introduce a greater choice of convenience assortment.
This year, the first Dealz distribution centre was launched. This is certainly an element of supply chain optimization, but is it also the first step to launch online sales?
As of today, Dealz has no plans to implement online sales. The distribution center will serve all stores of the chain. Optimization consisted in building a warehouse that would meet our needs and would be adapted to the specifics of the product. Its location in central Poland allows us to optimize transport costs and shorten the average distance to stores. On the other hand, the introduction of new processes in the warehouse increases its operational efficiency.
Finally, I would like to ask you about the biggest challenges that Dealz is currently facing
Last year, we all felt the limitations and difficulties of the Covid-19 pandemic, when suddenly even greater challenges arose. The war in Ukraine, the lack of availability of components, the energy and inflation crisis, the tightening of the belt by customers, delays in investments, all this had a negative impact on the market situation, the effects of which we as companies and society feel to this day.
Nevertheless, Dealz has coped with these challenges very well, adapting its commercial strategy, logistics and purchasing to a dynamically changing environment. Last year, the like-for-like result was very strong, and this year we expect double-digit growth, and we are on track to achieve this goal. Our policy, strategy and execution are at a very good level and allow us to deal with difficulties.