According to a new Colliers report, “Luxury Retail Brands in CEE-6”, the key factors attracting luxury brands to Central and Eastern Europe include increasing local affluence, customers’ desire for Western standards of living and the cities’ tourism potential.
The Central and Eastern European region is one of the most dynamically developing in the world, which is why the middle class and the group of very wealthy people are growing. Rapid development is accompanied by a strong desire for a Western standard of living, which is particularly visible among consumers traveling for business and tourist purposes.
The Richest Group. How Much Do You Have to Earn?
According to Eurostat data from 2022, in order to be included in the group of the wealthiest 1% in the countries of Central and Eastern Europe, it is enough to achieve an annual income of between 18,000 euros (in Romania) and 38,000 euros (in the Czech Republic). In Poland, on the other hand, it is around 27,700 euros. For comparison, wealthy people in Germany, France and the Netherlands earn around 90,000 euros per year. Even in less wealthy Spain, this threshold is 60,000 euros. The threshold for entering the group of the wealthiest 10% or 20% in some Western European countries is comparable to 1% in some Central and Eastern European countries.
– Although the CEE-6 data may seem unpromising at first glance, it is important to consider the historical context. For decades, Western Europe had a greater capacity to accumulate capital than the CEE countries, whose development was hampered by communism until 1989. However, the CEE-6 countries are catching up quickly. Between 2005 and 2022, the income threshold for the top 1% more than doubled in all CEE-6 countries, with Bulgaria experiencing an almost six-fold increase. In comparison, countries such as Spain, France, Germany and the Netherlands saw growth of just 55% to 67%, less than half the rate of most CEE-6 countries, says Silviu Pop, Research Director for CEE and Romania at Colliers.
There are fewer wealthy Poles than Czechs
Despite the growing economic potential and improved quality of life in Poland in recent years, the luxury goods market in Poland is still in the early stages of development. The purchasing power of an average Pole is less than 9.5 thousand euros per year. In the Warsaw agglomeration, it is much higher, reaching 14 thousand euros. In the capital, 1.8% of households (almost 17 thousand) have annual incomes exceeding 100 thousand euros.
– There are reasons to be optimistic about income growth in CEE, especially in the higher end, which is good for the luxury market. While local purchasing power remains the focus, international travel is also getting back on track. Although CEE countries cannot yet compete with global luxury hubs, less saturated markets offer higher margins for retailers – says Dominika Jędrak, Head of Research and Consulting in Poland and CEE at Colliers.
The growth of the luxury goods market is supported by the growth of air traffic. In 2023, both Warsaw airports served 21.9 million passengers, which is a 4.8% increase compared to 2018. Among them, the increase in the number of passengers from destinations such as East Asia should be noted, where the positive impact of the development of the number of air connections to destinations such as Seoul, Tokyo and Beijing can be seen.
It is becoming easier to find luxury brands in Warsaw
The report published by Colliers analysed 179 brands divided into three groups: "ultimate luxury and luxury for the aspiring", "accessible luxury" and "premium brands".
It shows that luxury and premium brands most often chose the Czech market, followed by Poland. This is particularly visible in the number of top-class luxury brands. Almost 80% of them are present in Poland, the Czech Republic and Romania.
Hermes, Louis Vuitton, Gucci, ZEGNA, Omega, Saint Laurent Balenciaga, Bottega Veneta…
– The Polish market is home to brands such as Hermes, Louis Vuitton, Gucci, ZEGNA, Omega, Saint Laurent Balenciaga, and Bottega Veneta – lists Małgorzata Kobziakowska, Associate Director in the Retail Department at Colliers – Other brands, including due to the turmoil caused by the pandemic, have decided to delay their entry into Poland. However, we are currently seeing a significant revival, and the market is waiting for more openings. Dior and Bvlgari have already announced grand openings for the coming months – adds Małgorzata Kobziakowska.
Warsaw with great growth potential
The Czech Republic is considered the most mature market for luxury brands in the CEE region. Prague in particular, which has become a center for high-end fashion and luxury goods thanks to its well-developed commercial infrastructure.
Poland and Hungary can be considered emerging markets with excellent growth prospects. Initially, luxury brands entered these markets through multibrand and partner stores. Having achieved good results in these formats, many of them now want to open their own stores to take advantage of the growing demand.
Warsaw attracts well-known foreign brands, among others, due to its strategic location, well-developed infrastructure and position as a business hub for the CEE region. The attractiveness of Warsaw is also increased by initiatives aimed at revitalizing and modernizing public spaces – the city already offers diverse shopping opportunities, from stores located in shopping centers and mixed-use facilities to developing luxury shopping streets. The most prestigious shopping offer in Warsaw is concentrated in two main locations: in the vicinity of Nowy Świat Street and Plac Trzech Krzyży, with the Vitkac and Ethos Warsaw Shopping Centers, and near the Old Town, Plac Piłsudskiego and the Grand Theater. Warsaw also has significant concentrations of premium brands in shopping centers such as Westfield Mokotów and Dom Mody Klif. Mokotowska Street also has great development potential in the premium segment.
The Romanian luxury goods market is mainly based on multibrand and partner stores. Slovakia and Bulgaria are still in the early stages of market development.
– The last 10-15 years have been good for the luxury goods trade sector in Central and Eastern Europe. If current trends continue, with rising disposable income, lower living costs and rapid economic growth in the CEE-6 region, combined with a strong move towards a Western lifestyle, the next decade looks even more promising – concludes Dominika Jędrak.