Pepco Opens Poland Hub and Freight Deals to Fight Supply Chain Costs

European discount retailer Pepco opened a new distribution hub near Gdansk, Poland, on Thursday to combat severe global shipping disruptions and soaring freight costs. CEO Stephan Borchert confirmed the company is using long-term container contracts extending beyond next summer to stabilize shipping expenses across its network of more than 4,000 stores.

Gdansk Distribution Hub and New Deconsolidation Strategy

Pepco operates more than 4,000 stores across 19 European countries and faces intense competition in the discount retail sector against rivals such as Netherlands-based Action and LPP’s budget brand Sinsay. To maintain its low-price advantage in a crowded market, the Warsaw-listed retailer opened a distribution centre near the Baltic port of Gdansk, Poland.

The facility introduces a specialized deconsolidation workflow designed to streamline inventory flow. Part of the Gdansk site functions as a deconsolidation centre where workers unpack containers and determine final destinations after goods arrive in Europe. Previously, distribution teams made those allocation calls while stock was still in Asia.

Severe Global Supply Chain Volatility and Shipping Delays

Retailers worldwide are dealing with elevated freight and fuel expenses driven by conflicts in the Middle East, with ongoing shipping disruptions in the Red Sea and the Strait of Hormuz snarling maritime routes.

White pointed to a difficult combination of challenges, including forced alterations to shipping routes and typhoons in China that stranded freight in Shanghai during August. These obstacles severely damaged delivery predictability across the network. According to the company’s logistics team, only about 35% of Pepco shipments arrive on time. Broader industry data from supply chain adviser Sea-Intelligence showed global schedule reliability at 56.4% in July, while Shanghai port reliability stood at just 21%.

Mitigating Cost Surges and Avoiding Consumer Price Hikes

Rather than accumulating extra inventory buffers, executive leadership is relying on advanced shipment tracking and multi-month freight agreements to navigate market volatility. Management chose to bypass heavy warehousing overhead.

Pepco bets on new Poland hub, long freight deals to build logistics resilience - Finance news and analysis from Global — Photo: Globalbankingandfinance

With quite long-term contracts …

Stephan Borchert, CEO of Pepco

Borchert noted that Pepco successfully secured container agreements extending beyond next summer. Neither Borchert nor White disclosed detailed financial figures regarding the exact magnitude of the higher shipping costs.

On the question of retail pricing, Borchert emphasized that the discount chain intends to do everything possible to protect shoppers from rising expenses. However, he cautioned that management would consider passing higher costs on to customers selectively if the entire industry was forced to act.