The latest data on retail sales do not inspire optimism. Despite a significant increase in the minimum wage, Poles are cutting back on their spending on durable goods, and even essentials. Sales drops are noted in categories such as furniture, appliances, clothing and footwear, as well as food and beverages. Moreover, the National Debt Register reports the retail industry has a backlog of 2.4 billion PLN towards its contractors, while it itself needs to recover nearly a billion PLN from its customers. A whopping 80% of this amount should go to wholesalers.
According to the latest data from the Central Statistics Office, retail sales in constant prices in October 2024 were higher than a year ago by 1.3%. Compared to September, there was an increase of 7.8%, however, comparing this month with August, there is a decrease of 5.7%. The increase from January to October 2024 was, year-on-year, 2.4% compared to a decrease of 2.6% in the same period of the previous year.
Despite all of this, progress is clearly slower than the rise in real wages in the economy which indicates that Poles are putting off purchasing durable goods for later and focusing on accumulating savings. This is confirmed by shrinking sales in October compared to the same month of the previous year in categories such as clothing and footwear – a decline of 12.8%. The drop for furniture, appliances, audio and visual equipment was slightly lower at 3.6%. Consumer spending on current needs is significantly decreasing – the decrease in the category “food, beverages and tobacco products” was 1.2%.
Unreliable contractors are a burden to wholesalers. The KRD has registered 62.5K commercial entities, their backlog reaches 2.4 billion PLN, and their average debt is 38.4K PLN. For the retail industry, periods of intense sales before holidays, linked to Black Friday, St. Nicholas Day, Christmas, and driven largely by online purchases, can sometimes be a lifeline.
However, as pointed out by Sandra Czerwińska, an expert at Rzetelna Firma, even the increase in consumer spending during Black Friday and the holidays is a positive signal for entrepreneurs, it’s only a part of the entire retail industry. When analyzing the sector’s condition, we shouldn’t forget about wholesale trade. As KRD data shows, the lion’s share of unpaid financial obligations, which is 1.1 billion PLN, is held by wholesalers. On the debtor’s list, there are almost 20,000 entities from the wholesale sector.
Even though, according to GUS data, wholesale sales in October were nearly 11% higher than in September and 5% larger than in the corresponding period of 2023, the big issue for wholesalers are payment backlogs. As Czerwińska explains, out of the total sum of 986 million PLN of unpaid obligations that the entire retail sector has to recover from contractors, as much as 80% is owed to wholesalers. This money is often not claimed because these wholesalers do not verify their business partners in the debtor’s registers and their collaborations are often built on word-of-mouth agreements or very general contract clauses, based on long term relations and the assumption that the contractor is honest. As it turns out, this does not guarantee payment reliability.
The companies facing the most significant financial trouble are small wholesalers and shops operating as sole trader businesses, of which there are 41.2K in the KRD. Their total debt amounts to 1.3 billion PLN, which is as much as 55% of the total debt of the retail sector listed in the register. The rest, almost 1.1 billion PLN, belongs to trading law companies.
Adam Łącki, the Chairman in the National Debt Register of the Bureau of Economic Information, explains: “Trade is the most indebted industry among all sectors of the economy. It accounts for almost a quarter of all backlogs listed in our database, which currently stands at 10.2 billion PLN. This is evidence of the challenges facing this sector. The images of joyful shopping portrayed in advertisements do not correspond with the actual financial situation of trade outlets based on objective data. In the first three quarters of this year alone, one-fifth of all bankruptcies announced in the Polish economy concerned trade companies. The total number of insolvent trade companies during this period reached 948. It is mostly small shops disappearing from the market, those that failed to integrate within a franchise or buying groups.”
The escalating problems of retail trade are confirmed by an analysis of payment credibility of this sector, conducted by KRD. Although over the last 12 months, the percentage of companies in the lowest H category decreased by 7.1%, the same number also decreased for companies in B category and by 2.3% for those in the highest rated category A.
As much as a fifth of the debt, or 583.5 million PLN, is owed by companies operating in the Mazowieckie province, home to 13.2K unreliable trade entities. They are followed by businesses from Silesia, owing 295.1 million PLN, with unpaid obligations held by 8.2K companies. Third is Wielkopolska – in this region 6.1K companies have 261.1 million PLN of debt. Lastly, there is a wholesale company in Poznań, responsible for the payment shed of 12.2 million PLN, 10.2 million PLN of which is owed to an industrial company.
Almost half of the backlogs in the trade sector should go to securitization funds, which have taken over debts from original creditors, primarily banks. That’s 1.1 billion PLN. Almost a fifth of the entire debt, or 593.6 million PLN, is owed by companies to financial institutions: banks, factoring companies, leasing and insurance companies. 302.6 million PLN is mutual debt in the industry. Furthermore, accounting offices, law offices, and consultancies are waiting for 203.5 million PLN’s worth of payment.
Trade has its own financial problems to deal with but having to recover payables from contractors only adds to the burden. The sector needs to recover 985.8 million PLN. Most of it is owed by their counterparts – 302.6 million PLN. The sector is also awaiting payment of 227.5 million PLN from construction companies, and 135 million PLN from transportation and warehouse companies.
Source: https://managerplus.pl/polacy-ograniczaja-wydatki-handel-w-tarapatach-24-mld-zl-dlugu-i-zatory-platnicze-obciazaja-branze-86430
