The Prague clothing market has recently seen yet another top international brand open its store. Parizska Street (Paris Street), one of two upper end shopping venues in Prague, was chosen by Gucci for its 350 sqm store in late March.

Gucci's general manager, Mark Lee, reportedly said there's competition for space from many other international players across various market segments (such as hotels, restaurants and other retail stores).

Gucci had been trying to open in Prague earlier, but spent considerable time looking for the most convenient location.

Since last year, foreign tourists and wealthy locals have been able to shop in new stores offering Burberry, Prada and Tod's. They joined other brands present on Parizska Street, including Giorgio Armani, Christian Dior and Cartier.

In fact, branded clothing is enjoying increasing popularity also among middle income Czech sectors across the country. But these shoppers are often not prepared to go shopping in prime retail locations in central Prague or pay the high prices.

In an effort to accommodate this demand, a new segment of the market has grown up in the form of outlets offering branded items at discount prices.

In Prague, the first discount store was Fashion Arena in Praha - Sterboholy (www.fashion-arena.cz), offering between 30% and 70% permanent discounts on branded items. Located in the north-eastern part of Prague, the centre has already attracted over 500,000 buyers just since November 2007.

Stores include international brands such as Levi Strauss, Lee, Wrangler, Puma, Nike, Reebok, Adidas, Umbro and Salamander. There are also many of the top local brands such as Blazek, Pietro Filipi, OP Prostejov and Apine Pro.

The centre offers fashion clothing and footwear, sport and outdoor products, leather items, lingerie, children's products, jewellery and other items - with a total of 70 shops.

A similar centre, the country's first, is called Freeport (www.freeport.cz) and it's located in Hate near Znojmo, on the Czech-Austrian border, roughly halfway between the Czech Republic's second largest city Brno and the Austrian capital of Vienna.

With just these two large centres, the Czech Republic lags behind countries in Western Europe, but also behind Poland and Hungary, its immediate neighbours and countries with comparable economic histories and fundamentals.

New outlets to come

Based on all the supply and demand factors, a growing number of centres is expected over the next few years, bringing new opportunities for the distribution of branded items.

New platforms could develop from existing shopping centres suffering from ever growing competition in the general retail market. The country now has over 230 hypermarkets and hundreds of supermarkets and discount stores, so they are forced to restructure and reinforce their market position with new formats and services.

A new outlet centre - Outlet Airport Praha - Galleria Moda (http://outletpraha.demo.wavegroup.it) is soon to open in Prague, under the auspices of Italian project developer B. Consulting.

Outlet Airport Praha is near Prague International Airport (which had 12 million passengers in 2007) and is expected to be the country's largest "retail centre" with some 170 shops, 2,500 parking places and a 300-room hotel with an entertainment park.

Another new outlet centre will this year start luring its customers in a location between Prague and Brno. The retailer is called Exit 66 (www.exit66.eu), with 67 branded stores; it's a project developed by the country's Devo Group.

A third player in this developing market segment is the Polish company Semax (www.semax.com.pl), which already operates two outlet stores in the Czech Republic under the name Vabbi Factory Outlet (located in Prague and Ostrava) with plans to build a chain of around 15 clothing stores over the next three years.

Prague is very much the key to these business models, with its 1.3 million population and as the 12th richest conurbation in the EU. It is top among the new member states which joined the EU in 2004 and 2007. Prague's GDP per capita is higher than the EU average, and doubles the figure for the whole Czech Republic.

Prague is also an extremely attractive destination for tourists (with over four million visiting in 2007) as well as being a popular destination for congresses and convention tourism.

So little wonder that foreign retailers - which could include Hong Kong-supplied clothing and shoes in their offers - are keen to see their growth in a market that's ripe for development.

from Filip Korinek, Prague Consultant