How is digitalisation affecting the Polish retail sector? Krzysztof Konczyk, digital director at Strategy& in Poland, talks to the BPCC’s Michael Dembinski about e-commerce and how, in an increasingly competitive market, players are seeking to increase market share by smarter use of data.
Michael Dembinski: Let’s begin with the big-picture overview of the Polish e-commerce market, its size and its growth potential, and the factors that are driving that growth.
Krzysztof Konczyk: It’s currently estimated to be worth around 140 billion złotys; that’s our estimate for 2024. We expect e-commerce in Poland to grow by another 52 billion złotys over the next four years – our view is that by 2028 it will be approaching 200 billion złotys. This valuation reflects both the maturity of the market and the dynamic changes that are currently shaping it. Our recent report[1] about the market shows that it has stabilised after initial growth driven by channel expansion and the pandemic, which accelerated e-commerce by big numbers. We’re now in this stage where the market has become very competitive. Several key factors are influencing market growth, the first being the increased digitalisation of customer behaviour. Growth is no longer solely driven by an increase in the number of users; that has flattened – it’s currently growing by around 1% every year.
So now the focus is shifting towards how often, how much and across what categories are Polish consumers purchasing online. Existing users are becoming more engaged, and are making more frequent and ever-larger purchases online. That’s the critical factor driving overall market expansion. Yet over the past 12 to 18 months, we’ve seen some value declines across the entire retail sector, largely due to reduced disposable incomes resulting from inflation. This economic pressure has led consumers to become more price sensitive, which in turn has intensified competition among players. In this competitive landscape, customer experience becomes a critical differentiator. Companies that want to stay competitive need to place a stronger emphasis on delivering a seamless shopping experience, from the initial online search to post-purchase support.
The rise of marketplaces continues to play a significant role in the growth of the Polish e-commerce market. Marketplaces provide platforms for smaller retailers to reach a wider audience without the need for investments in their own digital infrastructure, while consumers appreciate the convenience of comparing products and prices from multiple sellers in one place, as well as the wider product offering.
Michael Dembinski: You mention ‘value declines’. Have the purchasing habits of Polish consumers changed post-pandemic? Are their shopping behaviours different online?
Krzysztof Konczyk: People are still buying, but they are really price sensitive, especially when it comes to e-commerce; they tend to look at the total purchase cost. This makes it really important for e-commerce players to compete not just on product prices. Because when it comes to the final decision as to whether the customer decides to buy in this shop or the other, it really comes down to the overall cost, including shipping fees. Strategies that attract customers with low product prices only to add substantial shipping fees at checkout often lead to cart abandonment and customer dissatisfaction. Companies must consider the overall cost including delivery charges – because that’s what customers are looking at.
Additionally, consumers now expect a high level of convenience throughout the entire shopping experience. This means offering multiple delivery options, as well as various payment methods. Furthermore, easy return policies and responsive customer service are key factors in ensuring customer satisfaction and fostering loyalty. E-commerce businesses need to provide flexibility and ease at every stage, from browsing to post-purchase support, to meet these evolving expectations.
Michael Dembinski: Is there a trade-off there between the speed and the price of the delivery? Is the typical Polish e-commerce customer thinking, “If I order it for middle of next week, it’ll be cheaper; I don’t need it now, so I’ll just take the cheapest delivery option to save money”?
Krzysztof Konczyk: No, not really. One finding in our report is that customers in Poland at this stage do not really expect same-day delivery. There are reports from the global e-commerce market showing a shift towards same-day delivery, but we don’t see that in Poland yet. In most of the categories we looked at, next-day delivery is really enough for customers. Delivery within two working days is entirely acceptable. But as to an option whereby a customer is prepared to wait, for example, five days, just to lower that the shipping cost – no.
Michael Dembinski: Let’s look at the strategic imperatives and opportunities for expansion. Where should companies seek new growth opportunities in the e-commerce landscape?
Krzysztof Konczyk: I think that there are four major strategic implications that companies should consider when looking for growth.
The first is omni-channel integration. It’s really critical. Our report shows that omni-channel customers who engage with the brand both online and offline tend to spend more, and tend to make purchases more frequently than single-channel shoppers. So this indicates that companies that provide a seamless integrated shopping experience across all channels will not only attract more customers but also build stronger and more loyal relationships. This works to such an extent that even firms where e-commerce represents a single-digit percentage of total sales should consider it and manage omni-channel strategies consciously, because for many customers, the online channel is the first point of contact with the brand and its product offerings, even if you don’t intend to buy something online. For example, I don’t intend to buy an Ikea wardrobe, or indeed any wardrobe online, but still I’m using Internet to go through different products, offerings of different brands. And those companies which ensure a consistent and engaging experience across all channels can effectively guide the customer journey from discovery to purchase and that, by extension, means that they will increase their brand loyalty and customer lifetime value.
The second is customer experience. This is becoming paramount in an increasingly competitive environment because you can compare product prices and in many shops, you will find very similar product prices and it’s really hard to fight only on the product price level and range of offerings. These are becoming more standardised. So with this growing competition, customer experience is becoming the key differentiator. It’s really, really important that companies should intentionally design, the entire so-called customer journey from the discovery stage, when consumers search for a product, through to the purchase and the post-sales service. Both in digital and offline areas. And of course, that means creating really user-friendly websites, creating user friendly mobile applications. Excellent customer experience should be present in all of your touch-points with the customer – your website, your mobile application, or your call centre.
The third factor is operational efficiency. Here, I’m talking about leveraging advanced technologies such as AI and robotic automation to streamline processes and reduce costs. And it’s automation in areas such as warehouse management, logistics and customer service. Automation is not just about saving money; it’s often the only way to improve the quality of work through the consistency and repeatability of the processes.
Finally, there’s data. Treating data as a key asset involves consolidating and standardising data across all operations, to ensure consistency and reliability. Interestingly, when we talk about this with industrial leaders, the challenge that many companies face today isn’t really lack of data – many companies have huge amounts of data – the challenge is the absence of the right data infrastructure, as well as the organisational capabilities needed to effectively unify and integrate the data, and to work on this data, so, investing in data infrastructure and fostering a culture that prioritises data-driven decision-making can significantly enhance a company’s ability to respond to market dynamics and make informed strategic choices.
Michael Dembinski: What is the role of AI in data mining, anticipating where the customer is going to go, what their next purchase in this particular area will be, what a given customer might be tempted to spend their money on?
Krzysztof Konczyk: Most of the companies we talked to say that they’re investing in AI but in most cases that’s still in the development stage. Everybody’s learning how to use AI efficiently and how to trust the AI in various operational processes. The other thing is the ability to use advanced data scientific solutions to really target their audience in an efficient way. I think many companies are still struggling with this. When planning to use AI in client-facing solutions, you need to be really careful. Your strategy shouldn’t be to replace humans in all client-facing services with AI-powered chatbots. The human touch remains important. So for example, if a consumer has a problem, or if you want to ask about a product, and you start chatting with a chatbot which doesn’t give a satisfactory answer, the question should be quickly switched to a human. Sticking with AI it doesn’t really build the confidence of customers.
Michael Dembinski: How has the ubiquity of mobile phones changed the e-commerce landscape?
Krzysztof Konczyk: Let’s look at the general picture. Mobile commerce is poised to dominate the e-commerce landscape in Poland, with its share of total online sales projected to exceed 50% by 2028. Different market reports show that over 70% of customers already use mobile device for their shopping; these two numbers are not contradictory; we observe the multi-channelling phenomenon where consumers start to engage with the purchasing process on one device and then switch to another device in later stages of the purchasing process. The easiest example is using my mobile phone while I’m commuting to search for certain product, but when I get home, I’ll switch to my laptop, to further dwell on the purchasing process. And this is one example. So that’s why the share in sales is lower than the share of usage of mobile devices in e-commerce in general. This growth is driven by increasing reliance on smartphones for everyday tasks including of course shopping. This is particularly among younger generations who favour mobile devices over desktops. For them, it’s their first choice to do most of the everyday tasks. So of course shopping would be one of them. I think companies should implement a mobile-first approach. This means prioritising the development of mobile applications that are not just functional, but also provide a highly personalised and intuitive shopping experience.
Michael Dembinski: How long do you think the mobile phone will retain primacy as the main device through which consumers will conduct e-commerce? When do you think it will be replaced by goggles, for example, future iterations of Apple’s Vision Pro, Meta’s Quest or Microsoft’s HoloLens?
Krzysztof Konczyk (PL): Personally I don’t believe that they will become more important than mobile devices in the next 15-20 years. Maybe even if technology allows manufacturers to make them smaller and lighter, that could be something possible. But I think there’s a long way before Vision Pro and other devices like that move from being a niche. I think it’s a long way ahead.
Michael Dembinski: Let’s move on now to the regulatory environment across the EU and in Poland. Where do you see challenges for e-commerce? What issues need to be smoothed out for e-commerce to keep growing? And indeed, are the traditional retailers calling for more safeguards to protect their shops.
Krzysztof Konczyk: ‘Digital’ basically means ‘data’. And the more data there is out there, the more concerns emerge about using the data and our own private information. So data privacy and security remain our top concern. And with the GDPR and other local data-protection laws in place, e-commerce companies are required to ensure that they’re handling customer data responsibly. And I think customers are looking at their data in more conscious ways than several years ago. We are now more aware that everything we do online leaves a trace. And that can be used against us. Another significant area of regulation concerns cybersecurity, especially with the introduction of the Network and Information System Directive 2 (NIS2). This directive demands that businesses, particularly those running online platforms, should implement security measures to protect against cyber-threats. These companies should be looking at comprehensive risk-management strategies and conducting regular security checks.
I also see more attention focused on sustainability regulations. Particularly around greenwashing. Companies want to be seen by their consumers as being green, being organic, as being sustainability-friendly. Consumers are increasingly looking for environmentally friendly products and companies really need to be careful not to make misleading claims about their sustainability efforts The EU is cracking down on phony environmental claims, so businesses need to back up their statements, to prove it so, to be really transparent. And there is the Digital Service Services Act (DSA), and the Digital Markets Act DMA). And these are aimed to create a safer online space, and ensure fair competition among digital players. And lastly there’s another one on taxation and reporting, there’s this Directive called DAC 7, and this directive introduces new requirements that will be especially tricky and controversial for many customers because it introduces, new requirements for digital platforms to report transactions which is aim at preventing tax evasion. And companies need to assure that they have accurate reporting mechanisms in place. There are many challenges regarding, law and regulatory challenges.
Michael Dembinski: Finally, you mentioned sustainability but packaging waste – the amount of unnecessary packaging that e-commerce companies put around the product which often just doesn’t need it at all. It’s just shuffling that problem onto the consumer, who ends up with lots of boxes that need to be disposed of responsibly.
Krzysztof Konczyk (PL): If it’s paper or card, it’s not too bad. But there’s too much plastic in the packaging too. The numbers of really conscious consumers is growing. These are kinds of practices that consumers take into consideration when deciding to buy again from this shop or the other. I think it’s really important. And the end consciousness about the environment means companies have to get up to speed; it will be more and more important for companies to adapt and to use less plastic platform only for the place on the commerce, seen. But with the thinking about the Earth and the environment.
Krzysztof Konczyk, director at Strategy&. Head of Digital with over 18 years of experience in forging Digital and e-commerce landscapes, effectively bridging the gap between technology and business.
[1] (In English) https://www.strategyand.pwc.com/pl/en/publications/2024/e-commerce-in-poland.html
