Inside Wealth

Luxury Shopping a Sign of Poland's Growing Wealth

Jan Cienski, Financial Times
Castle Square in Warsaw old town, 30th July 2010. (Photo by Luis Davilla/Cover/Getty Images)
Luis Davilla

Luxury is a relative concept. In Poland just over two decades ago, it was the height of luxury to have a steady supply of toilet paper, a washing machine and a few U.S. dollars to buy some stick deodorant at a Peweks hard currency shop.

But definitions of opulence can change quickly as a country becomes wealthier, an observation that has made Jerzy Mazgaj rich by catering to the growing taste for high-end goods among the increasing number of wealthy people created by Poland’s market economy.

“People of success want to differentiate themselves,” says the heavyset, balding man, who wears Ermenegildo Zegna suits, monogrammed shirts and a Rolex watch. “After a few decades of life under Communism, where professors and workers had the same ration cards for the same terrible meat, they would want a breath of fresh air and finally to look like people in the west.”

His wealth has grown alongside that of Poland. It is the only European country not to have fallen into recession since 1989, and has fared better than any other in the EU since the 2008 financial crisis. As the finance ministry points out, Poland’s gross domestic product expanded 15.7 per cent between 2008 and 2011, while the EU average was a contraction of 0.5 per cent.

Mr Mazgaj’s company distributes brands such as Burberry, Kenzo and Zegna as well as Cuban cigars. He has even written books on cigars and single malt whisky that are all part of a drive to bring an appreciation of the finer things in life to Poles, and his story is emblematic of how the country’s luxury sector was born and is evolving.

Mr Mazgaj acquired his first capital in the same way as many of his compatriots: by using foreign travel not to visit museums and galleries but to buy and sell. In the 1980s, central European trains were busy with Poles buying cameras in East Germany, trading them for gold in the Soviet Union, tights in Bulgaria and leather goods in Turkey. Mr Mazgaj sold Soviet Zenit cameras in India in the early 1980s and used the money to buy modern cameras and VCRs in Singapore to sell in Poland.

It was in India that he witnessed the rapid creation of a luxury market and he realised the same thing would happen in Poland once the Communists’ grip on the economy was loosened.

In 1988, the year before the fall of Communism, Mr Mazgaj headed off to the Metzingen headquarters of Hugo Boss, the German fashion house, to badger it into letting him sell its suits in Poland. “They thought it I was crazy,” he says. “The sales director was astonished to see me because their research showed that the average monthly wage in Poland was $30, which would be a problem in selling $2,000 suits.”

The research was not wrong, but Mr Mazgaj was right that there would be a market for luxury clothes, although some customers were stunned by the prices. “They thought there were too many damn zeros,” he laughs.

But he was selling to the early winners, and they were eager to buy. “There was a rising group of people who understood that you make a decent impression in a properly made woollen suit,” says Mr Mazgaj. “Those first clients weren’t from the intelligentsia, but raw new money who had to be taught not to wear white socks with their suits.”

Now, increasingly prosperous Poland has a growing number of wealthy people. The number of legal dollar millionaires in 1989 was probably less than a dozen, while now there are about 50,000, according to an annual report on Poland’s luxury goods market by professional services firm KPMG. However, that still represents only 0.13 per cent of the population.

KPMG calculates that there are about 606,000 Poles that it defines as “wealthy” – those earning more than 15,500 zlotys ($4,550) a month – and that their number has almost tripled in the past decade. That level of salary affords a comfortable standard of living in Poland.

“It’s sort of a ‘Made in Poland’ definition of wealth,” says Andrzej Marczak, a partner at KPMG and co-author of the report. “The standards are a bit different in the west, but [Poles] are catching up.”

For Poland’s newly wealthy, luxury purchases are still largely consumables such as expensive watches, clothing, alcohol and accessories. Big-ticket items are still rarities: the vast majority of premium brand cars on Polish roads were bought second-hand, and the country has only nine helicopters in private hands.

However, the top-end market is growing. Warsaw has Rolls-Royce and Ferrari dealerships, the latter at the old Communist party central committee building, and a sleek new shopping centre, Vitkac,selling brands such as Gucci, Yves Saint Laurent and Giorgio Armani.

Michal Maske, marketing director with Granturismo Italia, the Polish distributor for Ferrari, says the Italian carmaker usually works through independent dealers but that it has to find a solid local partner who can invest enough to keep up brand standards – and that is now possible in Poland. “The biggest factor was that someone here had to decide on opening a salon.”

However, the brushed metal and concrete-floored space of Vitkac is not crowded, and the KPMG study shows that while luxury brands such as Christian Louboutin are available, others such as Tiffany & Co. or Harry Winston are still absent.

Nevertheless, the appetite for quality is spreading. “The Polish middle class has travelled. They’ve been to ski in the Dolomites, and to Paris and to London, and they want the same sorts of things here,” says Robert Mielzynski, who opened an eponymous Warsaw wine bar and an upmarket boutique selling limited-edition olive oils and balsamic vinegars eight years ago. “A lot of people doubted me, but I knew this would work.”

Mr Mazgaj is now aiming at the same market. He has a network of delicatessens and a chain, Krakowski Kredens, selling sausages, meats and preserves that use traditional recipes. “Apricot jam according to Countess Potocka”, a 19th century aristocrat, is one example.

“The only area where Poland really stands out is food,” says Mr Mazgaj, who plans to open Krakowski Kredens overseas. “If we wanted to be bloody clothing designers, no one would believe it – but we can do it in food.”

As Poland continues to catch up with western European living standards, Mr Mazgaj calculates that the appetite for luxury is nowhere near sated. “Out in the countryside, if you ask people what a luxury brand is, they’ll say ‘Adidas’. A lot of people have never heard of Patek Philippe or Armani,” he says. “We still don’t have a mass market in luxury in Poland.”