Competition on the retail market in Poland in the conditions of the digital economy

Luc Williams

What does the retail market in Poland look like today? Today, the market is dominated by the largest players such as Lidl and Biedronka. Their business models were undoubtedly influenced by the COVID-19 pandemic, which further accelerated the use of digital technologies. It should be noted that the influence of large players on the pricing policy depends, among others, on: on the level of competition in a given market segment. The more the market structure deviates from monopolistic competition towards oligopoly, the greater their influence on prices.

The current reality in retail is shaped by the dynamic development of new digital technologies called FinTech. A breakthrough in the development of FinTech enterprises was the creation of the first smart phone (smartphone) and its popularization. Modern technologies have changed the conditions of retail sales for both parties, both sellers and buyers. They enabled stores to use new sales channels for their products and minimize employment costs related to, for example, the use of automatic cash registers. They enabled buyers to shorten the operation time, which means that not only the young generation willingly uses modern technological solutions.

Mobile payments and changes in retail trade

The development of mobile payments has caused revolutionary changes in retail trade, just as in the early 1990s the global Internet caused the development of electronic payments. The new FinTech technology has revolutionized the functionality of smartphones, websites, social networking sites and changed consumer habits. More and more customers make purchases, exchange currencies, pay bills, order domestic and international transfers, use online banking, make donations, organize fundraisers, learn and communicate using their smartphone. The use of mobile devices generates a huge amount of information such as: geolocation, time and place of transactions, types of applications used, device model, selected mobile operator. The analysis of this passive data generated without the consumer’s awareness is able to outline his habits, expectations and needs. Such information is used by large Big Tech companies that come from various parts of the digital services sector (Amazon and Alibaba, for example, have their roots in e-commerce) and now also offer financial services. Another group consists of “Challenger” banks, whose goal is to compete directly with traditional banks. These banks do not have branches and operate exclusively online or via applications, e.g. Starling Bank, Monzo, Revolut, Metro Bank.

Mobile applications have changed customer behavior on the banking market and payment methods in retail. Currently, a bank account can be managed using a special mobile application created by a given financial institution. More and more bank account holders decide to set up mobile banking as part of an existing or newly opened personal or savings and checking account. Mobile banking is one of several available forms useful in servicing a bank client’s personal account, both traditional and Challenger type. Applications enabling instant online payments are becoming more and more popular: Payu, Paypal, Blik. The ability to make such payments is a catalyst for selling products and services online. The popularity of BLIK payments is mainly due to the simplicity of use via mobile devices. When purchasing a given product, you do not need to log in to online banking, enter SMS passwords or payment card details, because all you need is a phone with your bank’s mobile application. Due to the increasing popularity of mobile devices, such as mobile phones and tablets, many banks in Poland have also decided to adapt to the current needs of most customers. Many financial institutions have created special banking applications that enable customers to service their accounts without the need to visit a branch in person.

Digital technologies and large-format stores

Retail enterprises began to introduce integrated sales models based on multi-channel, implement new consumer-oriented technologies, and the role of innovation and automation in customer relations has increased. But there has also been an extremely important change for sellers in the behavior of consumers themselves, which is more focused on the use of new technologies. There are two main channels: electronic payment methods and self-service checkouts. The first channel concerns the change in business models of financial institutions and financial services run by banks and parabank institutions, the second concerns the evolution of the business model of supermarkets themselves. Self-service checkouts first began to be used by the largest players, the so-called hypermarkets (e.g. Auchan introduced them in its stores much before the COVID-19 pandemic). Currently, self-service checkouts are found in all hypermarkets and almost all supermarkets. The use of new technologies is therefore related to modern payment systems, which are a manifestation of changes in the financial sector. The use of self-service checkouts, on the one hand, saves customers’ time and, on the other hand, allows stores to minimize costs by reducing employment. The latter phenomenon causes profits to increase on the retail market and the market power of the newest suppliers increases. Moreover, the impact of the dynamically growing minimum wage in recent years on labor costs may result in a further increase in the number of self-service checkouts, and thus also in the development of the use of digital technologies, including both in relation to payment systems and in the form of further sales automation.

The current problem is therefore to estimate the level of competition on the retail market. In the economic literature based on the theory of the achievements of industrial economics and new industrial economics, when assessing competition, measures of concentration are taken into account, among others: Herfindahl-Hirschman index (HHI), CR concentration measuresk. An alternative approach is the Linda index (cf. Linda, 1976), which is not as widely used as concentration indicators, but is also presented as an acceptable measure for analyzing market concentration (cf. Pawłowska and Puchalska, 2019). The results of existing research on market structure even emphasize the need to use the above indicators simultaneously for a more complete market analysis, as each of these indicators has its advantages and disadvantages.

The Linda Index (IL) helps explain changes in market power in the so-called oligopolistic core. Therefore, using this index to analyze competition in the “Retail sales in non-specialized stores” industry in Poland may correctly reflect the prevailing competition on the retail market. The analysis included all enterprises with more than 9 employees, i.e. all large retail stores and chain stores offering mainly food products and household chemicals, incl. e.g. Biedronka, Lidl, Dino. Small retail stores, e.g. local stores, where the employment did not exceed 9 people, as well as large specialized stores selling construction goods, electronics and household appliances, were excluded from the analysis.

The results of the Linda index measurement in the “Retail” industry indicate an oligopoly structure. The table presents the results of the study on the level of competition in the “Retail” industry, including the values ​​of the HHI and CR indicators7 and the values ​​of the Linda index and its basic statistics for the years 2009–2022.

Results of the analysis of HHI, CR7 and Linda indices /

The pandemic has resulted in the strengthening of the largest players on the retail market. The oligopolistic structure of the industry is strengthening, including, among others: the largest chains of retail stores on the food market, including both hypermarket chains and discount stores. The analysis of the level of competition using the Lind index shows that in the years 2009–2022 the oligopolistic arena consisted of 6 to 8 largest players. During the pandemic in 2020-2022, the number of players decreased from 8 to 6. Thus, in 2020, the oligopolistic arena consisted of 8 companies, in 2021 – 7, and in 2022 – 6.

Values ​​of the Linda index system /

Moreover, the analysis of the minimum of the Linda index (ILmin) shows that the level of competition in this industry was increasing until 2019, as evidenced by the fact that it was achieved for an increasingly larger parameter m, determining the number of enterprises that are the most important players on the market. In the years 2020–2022, the largest players began to strengthen and take over part of the market. Two players have left the oligopolistic arena and now a group of 6 players dictates prices in the “Retail” industry. Additionally, CR indicators7 and HHI increased. A clear increase in concentration indices (e.g. the HHI index has doubled over the last 10 years) indicates an increase in the concentration of revenues in the group of the largest enterprises in the population, and therefore confirms the decline in market competition and the strengthening of the position of the largest players who now compete with each other.

Analyzing individual data, it should be noted that the largest company on the market and the main industry leader has been Biedronka since 2004, the second position in terms of market share has been held by Lidl since 2016, and the market power of both these companies in the last seven years research was the largest and constantly growing. Due to its very dynamic development and large number of outlets, the Dino chain of stores should also be mentioned among the leaders (at the end of Q3 2023, there were 2,340 of them – see DINO POLSKA SA – The Dino chain has 2,340 stores; 184 new stores opened from the beginning 2023 (, which competes with the other two companies, including: choosing locations in smaller towns.

The future of retail in the digital age

At the beginning of the pandemic, it could be assumed that the increase in the importance of e-commerce and small local stores during the lockdown period may only be temporary. Currently, it seems that these expectations are indeed being realized. After the period of traditional trade being replaced by online sales channels, some customers have returned to the traditional shopping model, although on the other hand some older customers have become convinced of e-commerce and have incorporated it permanently into their lifestyle. Therefore, the competitive fight is won today especially by those stores that are able to flexibly attract customer interest, using omnichanneling, i.e. both stationary sales and online sales channels, including social media. Some small stores, with fewer opportunities and capital, are taken over by large players who can more easily adapt to the demanding market.

The authors express their own opinions, not the official position of the National Bank of Poland

Małgorzata Pawłowska, Department of Economic Analysis of the National Bank of Poland

Katarzyna Puchalska, Department of Economic Analysis

Financial Observer – open license /


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