Małopolska and Kraków Outlet Centres: Potential, Characteristics, and Challenges

The Małopolska and Kraków outlet centre market has significant potential, distinguishing it from other regions in Poland. Its strength lies in its strategic location, attracting residents of this unique region and tourists from home and abroad. Investments in new facilities, such as Designer Outlet Kraków, show that the region is ready to develop this retail sector. However, the outlet centre market also faces challenges that may affect consumer demand. To address these challenges, outlet centres must continuously invest in infrastructure, technology and marketing strategies to best meet the needs of today’s and future consumers.

Outlet centre market experts Krzysztof Gaczorek, CEO of KG Group and Thomas Reichenauer, Co-Founder and Managing Director of ROS Retail Outlet Shopping, talk about the potential of Małopolska.

Is Kraków a favourable market for the development of outlet centres?

KG Group: Kraków is a city with great potential. The success of the capital of Małopolska is undoubtedly due to several key elements. The most important of these is human capital – Kraków has a population of over 806,000, including over 144,400 students. As the second largest city in Poland, it has excellent conditions for doing business, especially in terms of innovation.

The 2011 World Investment Report of the United Nations Conference on Trade and Development (UNCTAD), recognised Kraków as the world’s best-developing location for investments in global BPO (Business Process Outsourcing) projects.

The city’s unemployment rate in December 2011 was 1.9 percent – below the national average of 5.1 percent at the time.

After Warsaw, Kraków is the second most visited city in Poland by foreigners. Małopolska, with its tourist and cultural attractions, including Kraków as one of its main centres, has the potential to become a major tourist destination. This, in turn, stimulates the demand for shopping. In this context, products at outlet prices, especially premium products, are popular. We see this in the growing interest in leasing space by foreign brands in this category.

Despite the city’s dynamic growth, no outlet centre operates within its borders. The first of its kind will be Designer Outlet Kraków, which is set to open in spring 2025.

Kraków’s attractiveness is not only influenced by its popularity as a tourist destination but also by a noticeable economic boom. The City of Kraków is planning a series of new investments to fuel the boom. In 2024, the city’s budget will amount to PLN 8.548 billion. Strategic investments in 2024 will be dominated by tasks related to the urban transport system. In terms of infrastructure, the city will benefit from two major road investments being implemented by the General Directorate for National Roads and Motorways (GDDKiA): the construction of the S7 expressway and the construction of the northern bypass of Kraków, which is expected to ease city traffic and allow residents to move quickly to different parts of the agglomeration.

What measures are being taken to attract new tenants to the outlet centre in Kraków?

ROS: The concept of the outlet centre itself is important and should be developed from the ground up. We believe that the attractiveness of a facility is higher when such a centre operates alongside other mixed-use facilities.
The synergy that is created influences the natural demand related to the complementarity of shopping.

To attract new tenants, outlet owners focus on creating an optimal mix of shopping opportunities that reflect the market trends in the various fashion categories.

The key to success is to focus on creating an attractive tenant mix that meets consumer needs and preferences. It is important to have a carefully constructed offer that includes brands in the casual, sports, outdoor and menswear categories that appeal to shoppers due to their versatility and high quality. Premium brands at outlet prices will undoubtedly appeal to the region’s residents and tourists.

What are the most promising directions for the development of the Małopolska outlet market?

ROS: The most promising development directions for the outlet market in Małopolska are those that focus on accessibility, diversity of offers, the creation of unique shopping experiences and adaptation to rapidly changing market and technological trends.

They address several key areas. It is important to develop infrastructure to facilitate access to outlets for residents and tourists. This means investing in better transport links and expanding car parks. It is very important to diversify the offer to attract different consumer groups. The focus should be on diversification, from clothing and accessories to multimedia and home goods. It is important to offer premium branded products as these are an incredible magnet when offered at lower than standard prices.

Creating an enjoyable shopping experience is also vital today. The aesthetics and atmosphere of the place are essential – they make shopping not just a transaction but a pleasure. Incorporating plants into the store, for example, on roofs or walls, and incorporating relaxation and catering areas into the design are steps in this direction.

Adapting to digital trends is another aspect. Outlets need to be flexible and ready to adopt new technologies and marketing strategies that meet the needs of consumers in the digital age.

What are the plans for sustainability and ecology in the strategy of the Małopolska outlets?

KG Group: Several initiatives are underway in Małopolska that could impact outlet strategies in sustainability and ecology. One of these is the European Funds for Małopolska 2021-2027 programme, which aims to achieve well-considered, integrated, sustainable development, improved quality of life and security for residents, and equitable transformation in the Western Małopolska sub-region. It includes environmental and climate change initiatives, including water management, biodiversity protection and the promotion of renewable energy sources. This may include measures to improve energy efficiency, the use of renewable energy and environmental restoration, which are key to sustainable development.

Although there is no direct information on specific plans for outlet centres, these types of municipal initiatives impact private investors’ actions. Designer Outlet Kraków implements responsible practices in terms of efficient waste management, minimising energy consumption and reducing CO2 emissions. In addition, we are certifying the facility under the BREEAM New Construction system to meet modern expectations of sustainable building principles. We want to be in line with regional targets and meet the demands of environmentally conscious consumers.

We are also taking into account the requirements of the Sustainable Mobility Plan for the City of Kraków and its functional area, which aims to reduce pollutant and greenhouse gas emissions from the transport system. We are creating a single parking area for the entire shopping centre, without the need to move to its more distant locations. A bus stop will be built in the area to make it easier for customers to use public transport.

How do you predict the impact of global trends on the Małopolska outlet market?

ROS: Managed by ROS Retail Outlet Shopping, Designer Outlet Kraków is the company’s fourth project in Poland and twelfth in Europe. The ROS portfolio includes premium shopping centres in Belgium, Croatia, Spain, Germany, Portugal and Hungary.

The increase in footfall and sales at centres managed by ROS Retail Outlet Shopping, including in Poland, demonstrates the growing interest of consumers and brands in this retail format.

Predictions about the impact of global trends on the Małopolska outlet market suggest that it will change similarly to those seen around the world. Global economic forecasts point to easing inflation and stable economic growth. For the outlet market, this could mean that consumers will be more willing to spend, but at the same time, they will be looking for value and quality, which is characteristic of outlets. Premium brands will be even more in demand.

In addition, we expect global trade to increase in 2024, which could support an increase in the range and brands available in outlet stores. However, it is important to be aware of challenges such as geopolitical tensions and changes in trade policy, which can affect import and export costs and, therefore, outlet prices. It is necessary to keep abreast of consumer preferences and adapt to the latest trends to meet customer expectations.

Are tourists a desirable target group for outlet centres? What can be done to increase their interest in visiting such a centre?

ROS: Tourists are an important target group for outlet centres. From this point of view, Kraków – the most popular tourist destination in Poland – is an attractive object of interest for outlet shopping. The outlet centre in Kraków will attract tourists with its premium shopping offer at attractive prices. The location of the outlet centre, which allows good and quick access, is not without significance.

In 2023, Małopolska was visited by more than 20 million tourists, an increase of 23 percent compared to the previous year. The majority of foreign tourists came from Great Britain, the USA and Germany. Małopolska’s estimated income from tourism in 2023 is PLN 13.03 billion. This is 16.2 percent more than in 2022. A statistical domestic tourist will spend PLN 574 in Małopolska, while a foreign tourist will spend PLN 1,913. Measures to increase their interest should include intensive promotional campaigns aimed at foreign visitors, as well as the development of tourism infrastructure and the organisation of international cultural events.

Are there any specific logistical challenges in the Małopolska region and in Kraków itself?

KG Group: There are indeed logistical challenges in the region for the supply of retail facilities, mainly related to location and infrastructure. As one of the largest cities in Poland, Kraków often faces traffic problems such as congested roads and limited urban space. However, investors in new developments such as Designer Outlet Kraków take these challenges into account and take steps to minimise their negative aspects. KG Group has invested in the redevelopment of the transport system around Nowohucka Street to make the centre more accessible to customers and suppliers.

There are also plans to create 2,000 parking spaces, which will also improve the centre’s logistics and accessibility. In the context of these measures, as well as the road infrastructure development plan included in the municipal budget for 2024, the outlook for logistics in Małopolska seems positive.