Poland’s largest clothing retailer, LPP, is addressing the impact of rising labor costs through strategic investments in logistics and automation. According to Przemyslaw Lutkiewicz, the company’s deputy head, the recent decision by Poland’s ruling nationalist Law and Justice (PiS) party to gradually increase the minimum monthly wage has put pressure on retailers to find ways to improve profitability. LPP is considering a slight increase in prices to offset the higher labor costs, but also exploring the introduction of new and improved products to attract customers.
In addition to these measures, LPP plans to open more stores in smaller cities as a response to changing consumer behavior in larger cities. As shoppers in urban areas become more conscious of the fashion industry’s environmental impact and purchase fewer items, LPP aims to tap into new revenue streams by expanding its presence in smaller towns. The company has set a revenue target of 10.5 billion zlotys for this year and plans to achieve a 16% increase in retail space. LPP also expects continued growth in online sales.
To enhance profitability, LPP is implementing radio frequency identification (RFID) chips on clothes stored in warehouses. These chips will provide more accurate stock tracking and help reduce inventory discrepancies. Furthermore, the company is investing in automation to minimize logistics costs, thus contributing to margin improvement.
While there were concerns initially about delays in product deliveries from China due to the coronavirus outbreak, Lutkiewicz reassured that shipments from Chinese ports have resumed and factories are expected to restart soon. This means that the risk of supply chain disruptions has diminished.
Overall, LPP is taking proactive measures to navigate the challenges posed by higher labor costs. By focusing on logistics, automation, potential price adjustments, and product innovation, the company aims to improve its margins and maintain its position as Poland’s leading clothing retailer.