The last issue of eppi magazine examined the development of the Polish promotional products industry over the last 20 years. Today, the country has a prospering market that is characterised by high quality awareness on the one hand and tough price wars on the other.
Chances and challenges
The subject of statistics and data regarding the size of a market is always a tricky matter – especially when the respective market has comparably few means of carrying out the corresponding measurements for reliable results. The same applies for all promotional products markets in Europe – and the Polish market is no exception to the rule. Therefore, the data that is available on the Polish industry must be treated with caution. The Polish publishing company GJC Intermedia estimates that there are around 1,500 companies in Poland that exclusively deal with promotional products, with a further 2,000 to 3,000 companies for which the promotional product plays an important, but not vital role in their business (see also the interview with GJC CEO Sławomir Giefing). The industry association PIAP (Polska Izba Artykułów Promocyjnych = Polish Chamber of Promotional Products) estimates the turnover of the Polish industry at around one billion Zloty (approx. 237.2 mil. Euros) which is generated by approx. 2,000 companies with a total headcount of around 20,000 employees.
As such, the Polish market is anything but small – the estimated turnover of the Dutch industry is for example only half the size. The figures, whether vague or not, reflect the fact that a pulsating industry has developed in Poland within just twenty years – analogue to an economy that has recorded constant growth for the past ten years.
“Promotional products are popular and are implemented in a wide spectrum of branches of industry. Major companies with the corresponding budgets, among others pharmaceutical companies, oil companies, in the broadest sense also FMCG (Fast Moving Consumer Goods) traditionally make good promotional products customers,” stated Magdalena Owczarska, Vice President of the PIAP and Marketing/PR Director at the Warsaw-based USB specialist, Citron. “The public sector also makes up a considerable share of the orders. The majority of the communities order promotional products as a means of promoting their region and to win over tourists and investors.”
John Lynch, CEO of the Krakow-based textile specialist Lynka, paints a similar picture: “Consumer goods, alcohol, automotive, food sector, IT, cosmetics, education, service sector – all come to mind. Furthermore, the sector of small/medium enterprises is of huge potential in my view.”
Association work and market structures
The undisputed hub of the Polish economy is Warsaw – in line with this the city is also the venue location of the largest Polish promotional products show RemaDays and the domicile of the PIAP. The association, which was founded in 2007, has set itself the task of representing and protecting the interests of the industry within the Polish economy. “This also includes among other things providing comprehensive assistance with problems related to working in the trade,” explained Owczarska. “The association constantly cooperates with experts, who answer questions via the Internet and give comprehensive advice. Furthermore, the PIAP conducts training measures on relevant themes – the association dedicates a large part of its time to training industry participants. Finally, we want to improve the image of the promotional product among the users and establish promotional products as a fixed item of the companies’ advertising budgets.”
At the moment, approx. 140 member companies belong to the PIAP – 60% of whom are suppliers and 40% are agencies. Making such a decision was not quite that easy in Poland until quite recently: The structure comprising of suppliers, distributors and users that is established in many places didn’t exist for a long time and even today, the barriers between the stations of the value chain are not anywhere near as strictly handled as in other European countries. The relevant trade shows are not limited to promotional products – they also include related areas such as advertising or printing technologies – nor are they closed-shop events; they can be attended by all market participants.
This has an historical background, yet things are slowly starting to change: “In Poland, due to the evolution of the market situation here, it would have been nearly impossible to build a company by servicing resellers only,” commented Lynch. “Today it is possible, and many suppliers are doing just that. As long as players have a transparent pricing policy and are fair to their agency clients, it is not a big problem.” Wojciech Pawłowski, Managing Director of badge4u, has observed a self-regulation of the market: “Fifteen years ago no differentiation was made between distributors and users, it was easy back then to contact big companies. Today the marketing departments work closely together with the distributors. A distribution channel, which can only be of an advantage to us suppliers – one single distributor can bring us lots of customers.”
Trends and classics
As far as product trends are concerned Poland is hardly any different to its European neighbours – Lynch stated several examples from the textile sector: “In general, Poland is seeing the adoption of most trends we see across the EU: active wear, i.e. technical fabrics, women’s wear, higher end jackets, and more and more clothing for the work place.”
Some classics remain stable for decades though as Owczarska reported: “Ballpoint pens, promotional mugs, bags and T-shirts have been popular ever since I can remember and for the past few years lanyards and USB sticks have also enjoyed great popularity. These standard products always go down well and nothing will change here in a hurry in spite of the huge array of catalogues the big European suppliers offer, which contain new technological innovations all the time. Products for smartphones and tablets for example don’t sell in Poland.”
Regarding the occasions on which promotional products are implemented, according to Owczarska the priority lies on the year-end business: “The most promotional products are implemented at Christmas. This public holiday is very special, not only as far as the order volumes are concerned, but also regarding the different designs and models that are implemented especially for this occasion.”
A fact that has hardly anything to do with religious aspects or only very indirectly: “Poland is a Catholic country with a long Christian tradition,” stated Owczarska. “However, devotional items don’t play a role on the promotional products market at all. They are available in all those areas, where the cultural-religious life takes place, but nowhere else.”
Prices, prices, prices
Regardless of the product or occasion – there is one feature that strongly characterises the Polish market: It is extremely price-sensitive. “Quite simply the most important sales argument is the price,” stated Grzegorz Pawłowski, Managing Director at the plastic products supplier Plastolan Polska. “At the moment a lot of orders are being tendered out and beyond that ridiculous prices are being demanded. In this sense we all ought to buy goods from the Far East, because even products manufactured in Poland often seem to be too expensive.”
However, losses in quality are out of the question as Owczarska explained: “The Polish people don’t tolerate low quality, but at the same time they are not prepared to pay for high quality. That sounds paradox, but that is exactly how it is. There is very strong competition within the industry and the companies battle it out to win orders by making do with extremely low profit margins. It will be a few years yet before the buying behaviour is no longer determined by the lowest price. Polish manufacturers produce high quality promotional products, which are on a par with those of their European competitors. However, during the negotiating period the companies wage wars to win over customers and here the price plays a very important role.”
Competition and jungle of bureaucracy
As everywhere else, price wars lead to dwindling margins and it is above all the resellers who suffer: “Many agencies are ruining themselves because their profit margins are too small,” reported Paweł Rydzewski, Managing Director of Macma Polska. “Lacking liquidity is also a major problem – Poland’s customary payment terms of between 30 to 40 days are in reality very seldom adhered to.”
In addition to this, the era of unlimited boom is drawing to a close – on this subject Rydzewski shares the opinion of many economic experts: “The Polish market still enjoys the reputation of being healthy and prospering – that is not quite true. Our market is by no means as big as many people think.” The result is of course increased competition – Lynch: “The market is extremely competitive, and generally a tough market to compete in.”
These are facts that the companies, who want to operate on the Polish market, should take into consideration. Furthermore, companies that are planning to set up their own subsidiary have to overcome a number of bureaucratic hurdles: “There is still a row of legal restrictions and anyone, who wants to do business, often has to apply for countless permits,” reported Pawlowski. “For example entrepreneurs, who buy a plot of land or who want to build a factory, often go through hell.”
Nevertheless, Poland is still an attractive economic location: A number of major importers have big customising plants there, where they can find skilled workers for a relatively low wage level compared to the rest of Europe. The geographically favourable location is a further advantage: Poland lies not only on the doorstep of the West; it is also the gate to regions like Russia, the Ukraine, Belarus or the Baltic countries.
Last, but not least – and this won’t change in a hurry – the Polish suppliers can boast a degree of competitiveness that makes their products exceptionally attractive for European customers.
photos: Kasia Trapszo, The Nite Tripper, Unit03 / flickr.com