As digital acceleration, inflation and maturing consumer behaviour reshape the Central and Eastern European (CEE) business landscape, local companies must pivot from being ‘locally competitive’ to ‘globally competitive’ to ensure survival. The polarisation of 'brand first' and 'price first' business models demands that companies choose between adding value or competing on cost. However, merely relying on price advantages is unsustainable for the majority of local brands in the increasingly competitive Central and Eastern European markets.
Brand First: Creating Value Beyond Price
'Brand first' businesses differentiate themselves by enhancing customer value through superior brand experiences, product presentation, and compelling marketing strategies. These brands build loyal customer bases by offering unique value propositions that go beyond mere price competition. For example, brands like Apple and Zara succeed not just because of their products, but due to the strong brand identities they cultivate.
Price First: The Battle for Cost Leadership
Conversely, 'price first' models focus primarily on cost savings, attracting price-sensitive consumers through discounts and low prices. However, this strategy is only viable for a few large players who can leverage economies of scale to maintain profitability. Retailers like Shein and Pepco exemplify this model, capitalising on their scale to offer lower prices than competitors.
Global Expansion and Market Shifts
While global companies face consumption slowdowns in China and the U.S., the CEE region, particularly Poland, is emerging as a strategic expansion area for international fashion brands. For instance, Spain saw a 25% increase in fashion exports to Poland in January 2024, totaling €151.4 million compared to €121.6 million in the same period in 2023, according to data provided by Icex Spain Export and Investment. Poland now ranks as the fifth most important market for Spanish fashion, surpassing previous years despite global economic challenges.
Challenges for Central and Eastern Europe (CEE)
In Central and Eastern Europe, local companies have traditionally relied on lower labour and production costs to compete. However, rising costs have eroded this advantage, placing these companies in direct competition with established global 'brand first' businesses.
Example: In Poland Consumer Price and wages have grown rapidly the past few years. Many local brands are positioned for previous market conditions where lower price was more of an advantage.
Many local firms have responded by doubling down on 'price first' strategies. Yet, this market is highly competitive and only sustainable for the largest entities. Smaller local brands face the risk of being squeezed out unless they shift focus towards enhancing their brand value.
Strategic Shifts for Local Brands
To thrive, local brands must shift from being ‘locally competitive’ to ‘globally competitive’, focusing on differentiating and focusing their brand identities, enhancing product quality and assortment, while delivering exceptional brand experiences. This shift is crucial not only for survival but for capturing new growth opportunities as international competition intensifies.
Kondo & Partners: Unlocking Growth
At Kondo & Partners, we specialise in unlocking new growth and revitalising brands. By identifying and amplifying your brand's unique strengths, we help you stand out in the market. Partner with us to adapt and thrive in this competitive environment by leveraging our expertise in strategic growth strategies, brand marketing, and product innovation. .
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