WARSAW, Poland — Having been pulverised like a staggering 80 percent of this city during World War II, Three Crosses Square was nothing but a pile of bricks when Jan Kulczyk was born, a few years after the Nazis surrendered. In the headquarters the Communists erected overlooking that famous square, the same officials who had confiscated his father's companies in the wake of the Soviet invasion were installed to rule the destitute country with an iron fist. And so they did for the next four decades of his life.
Today, Kulczyk is a 63 year-old billionaire planning to open a sleek luxury shopping arcade on that very square, surrounded by the likes of Burberry and Zegna which have already set up shop nearby. Just next door, ambitious financial brokers now occupy the imposing edifice where Cold War-era politicians once kept the economy so threadbare that stores would often run out of shoes and soap well into the 1980s.
The potent irony and symbolism of such an extraordinary urban transformation certainly isn't lost on most Poles. But this isn't about trying to rewrite a deeply tragic history with shallow designer logos. Kulczyk's foray into luxury fashion is simply another shrewd move for a tycoon who hitherto made his fortune spotting opportunities in less delicate pursuits when the market was just right — cars, oil and beer, to name a few. Although his luxury arcade has yet to be completed and no tenants have been disclosed, representatives of Kulczyk's joint venture with Silverstein Properties have indicated that Ethos, as the arcade will be known, intends to capture the very pinnacle of the market.
Marquee names like Hermès, Chanel, Prada and Dior have been touted by observers as the most likely targets since none of them have yet to stake a claim in Polish soil despite the country's spectacular ascent after joining the European Union ten years ago. Having undergone "shock therapy economics" in the early 1990s to keep it from going bankrupt, Poland in turn shocked the world as it emerged hyper-charged less than two decades later. As the only country in Europe to escape recession during the global financial crisis and, later, as the continent's fastest-growing economy for several years in a row, international investors in many sectors began to see Poland in a whole new light.
It was this revelation that ushered in the first wave of global fashion companies: high street and fast fashion brands. So famished was the market for affordable, trend-led clothing that brands like H&M and Inditex-owned Zara very quickly came to dominate the landscape. H&M now has a whopping 114 stores in every corner of the country compared to just 43 in nearby Russia. Total H&M sales from Poland in 2012 reached the equivalent of about €332 million (about $451 million at current exchange rates) while Russian outlets banked a third less, at around €239 million (about $325 million), although, admittedly, the brand has been present in Poland a few years longer.
Nevertheless, Russia has four times as many people and a far vaster territory, and the comparison shows not only how ubiquitous H&M has become in Poland, but also how lucrative this segment of the market is here. Indeed, this fact has also been the very making of a few big local players in the same arena, like LPP whose portfolio includes Polish brands like Reserved, Cropp, Sinsay, House and Mohito which collectively add up to about 270 retail outlets in Poland and neighbouring countries.
"Besides the fall of communism and joining the EU, the next big milestone that really changed the way people dress here came in 2003 when the first H&M store opened. It made Poles indistinguishable from the youth of other European nations," says Filip Niedenthal, executive fashion editor of Harper's Bazaar Polska which bowed here last year through a partnership between Hearst and Marquard Media Polska.
"Today, Zara, H&M and COS are making a killing in Poland and Warsaw's many shopping malls — like Galeria Mokotow, Zlote Tarasy, Arkadia and Klif — always seem to be packed," he adds. And by most accounts, it's a similar story around the rest of the country from the Stary Browar mall in Poznan and Manufaktura in Lodz to the Galeria Baltycka in Gdansk and the Silesia City Center in Katowice. So popular are malls in Poland that they have put great pressure on city centre, high-street shopping and older department store chains like Peek & Cloppenburg.
Yet during the same period that the high street and mid-premium segments were exploding, the world's leading high fashion groups — LVMH, Kering and Richemont among them — seemed far less interested in Poland's meteoric rise than they did in that of other geographies. According to auditing firm KPMG, the Polish luxury goods market was one of the fastest developing in the world between 2005 and 2010 with actual growth of 50 percent. By comparison, China, Russia and Vietnam, which like Poland experienced an economic blossoming after the opening up of their markets, were of course far more attractive because of their greater scale and greater overall wealth. But this was not the only reason the luxury giants were distracted from entering the likes of Poland until very recently.
"Generally, Polish consumers would rather choose well-known brands with quality and a kind of coolness that doesn't put them on a stage," says Anna Jurgas who began her career at Elle before being appointed editor-in-chief of the Polish edition of Glamour four years ago.
In other words, here, the road to discernment has been a more gradual, prudent and even introspective one, in sharp contrast to the other markets where conspicuous consumption and extravagant taste seemed to grip the fashion-conscious as soon as wealth began flooding in. Although many other former communist countries also endured a century of extreme social upheaval, the hard years in Poland seemed to impact people in a way that made many Poles hesitate before flashing their cash on expensive clothes quite so soon after lifting themselves out of poverty.
"The Polish market's [taste for fashion] can't be compared to something like the Russian one. It's a misconception to believe that, just because we're neighbours, there are significant similarities. Actually, Poland is much more comparable with the Czech Republic or Germany [than to Eastern Europe]," says Arkadiusz Likus, a pioneering Polish retailer who brought brands like Maison Martin Margiela and Ann Demeulemeester to local shoppers ten years ago through the Likus Concept Store he founded, which has outposts in three of the country's most style-conscious cities: Warsaw, Krakow and Wroclaw.
But two years ago, after nurturing an eager client base for his multibrand space, the young chief executive decided that Poland's capital city was now finally ready for a much grander designer emporium and a more varied assortment. Likus duly opened Warsaw's first luxury department store, Vitkac, a stone's throw from the independent fashion boutique thoroughfares of Mokotowska and Koszykowa streets, right around the corner from Three Crosses Square.
With that, the second wave of international brands began to arrive. Likus persuaded Gucci, Lanvin, Bottega Veneta, Saint Laurent and most recently Louis Vuitton, in June, to open monobrand shop-in-shops in Vitkac while diversifying the labels he stocks in the Likus Concept Store which anchors the building.
"Poland’s luxury fashion market is still in its infancy. Don't forget the country only freed itself from communism in 1989. But the luxury fashion market is growing thanks to a huge increase in wealth and disposable income. It's still early stages, but there is solid demand here. So we took a gamble," he says.
If anything, it seems to be a rather astute gamble as the immediate forecasts bode very well. According to Credit Suisse's 2012 Global Wealth Report, there were an estimated 38,000 millionaires (measured in US dollars) in Poland that year, but in just five years time the number is set to more than double to 78,000 by 2017. That means that the number of affluent individuals in Poland will soon outdo the number in Dubai and Abu Dhabi combined, as the entire UAE is predicted to have only 48,000 millionaires by that time, although the UAE's total wealth is, of course, much higher and enjoyed by a considerably smaller population.
At the very apex of the market, the number of Polish super-rich is also expected to swell. In just a decade, high net worth individuals (HNWIs, with assets of at least $30 million) will increase from 799 in 2012 to 1128 according to data provided by The 2013 Wealth Report by Knight Frank Research. As a result, Poland's super-rich should number twice as many as those in neighbouring Ukraine.
"The market here is still very polarised," says Likus. "On the one hand, upmarket shoppers are very knowledgeable about the collections from the world’s fashion weeks, so they seek out the best pieces from a particular brand. But [that means] they need to make a lot of effort to be satisfied... On the other hand, mainstream shoppers are still mainly looking for a bargain. They tend to buy discounted goods and are driven by promotions as opposed to wanting a particular product or brand."
However, the vacuum left by this polarisation has begun to help local, niche and online fashion to flourish. This is arguably Poland's third and most recent fashion wave. Pan-European e-commerce sites like Zalando are growing rapidly here and according to Ewa Kowalewska-Kondrat, founder of one of the country's leading fashion blogs Harelblog.pl, "two big, exciting online stores with Polish fashion appeared in 2011: Mostrami.pl, which is something like a modest Net-a-Porter, and Showroom.pl, which is more like Etsy. And I happen to know that they’re both going very well," she says.
Polish designer labels with a loyal clientele and flagship boutiques such as Ania Kuczynska, Robert Kupisz and Bohoboco have carved out a small but meaningful slice of the market too. But Harper's Bazaar Polska's Niedenthal is more excited about another area of local business. "Suddenly Polish youth labels like Local Heroes, MISBHV and Aloha from Deer seem to be taking over the world. Cheaply made, sold for a lot and worn by Rihanna, Cara Delevingne and Justin Bieber. No Polish designer has that range; that access," he says.
Glamour's Jurgas agrees, citing others like Risk, Made in Warsaw, Nenukko and SHE/s A RIOT. "They're offering a mix of street, sport and elegance at a good price, good quality and as an attractive alternative to mass market brands," she says.
With cheeky, irreverent brands like these bubbling up from within and the next wave of international luxury megabrands and specialty labels about to hit Poland's shores, consumers here now seem ready to embrace a much more diverse palette than ever before. Although this may never be a place where the avant-garde or truly flamboyant feel at home, that doesn't mean Polish shoppers aren't adaptable. And even if the economic tides are not quite as auspicious as predicted — or if the ride along the way is a bit bumpier than expected — this market will cope, explains the editor-in-chief of Poland's fashion trade magazine Moda Forum.
"If you retrace our history, you can see we've all too often been in difficult situations. I think that we've got a 'special gene' to deal with them," says Malgorzata Sobiczewska. "We aren’t afraid of any rollercoaster."