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Retail sector in Turkey is considered to be the most attractive market for foreign investments. Large population over 70 million, increase in purchasing power, changing consumer behavior in favor of Western style goods and trends are the main reasons why a foreign company should invest in the retail market in Turkey. Turkey’s youth dominated population attracts foreign retailers to invest in the Turkish retail sector, which is mainly controlled by independent local firms.
Retail sector in Turkey is considered to be the most attractive market for foreign investments. Large population over 70 million, increase in purchasing power, changing consumer behavior in favor of Western style goods and trends are the main reasons why a foreign company should invest in the retail market in Turkey. Turkey’s youth dominated population attracts foreign retailers to invest in the Turkish retail sector, which is mainly controlled by independent local firms. Although this local hegemony has lasted many years, it appears to be challenged by foreign companies with ambitious expansion plans. According to the Turkish Undersecretariat of Treasury, the majority of foreign companies in Turkey are in retail business and their total number reaches 6,638.
Because the retail market is in the developing stage unlike the satured markets of Europe and the United States, it promises greater potential for investors. According to a market analysis entitled ‘Retail in Turkey 2009’ by PMR publications, Turkish retail sales have amounted to TL 225bn (€118bn) in 2008, posting a growth of over 11% on 2007. Retail turnover index prepared by Nielsen and Turkish Trade Council of Shopping Centres and Retailers indicates food and non-food retail turnovers increased by 8% and 11%, respectively. Retail sales are expected to increase further by extension of time on tax discounts.
Besides major independent retailers owned by Turkish businesses, traditional channels like small mom-and-pop stores (bakkal), open-air markets (pazar) and street vendors (isporta) are a big reality of the market. In order to enter the market, foreign retailers prefer to form joint ventures with experienced Turkish retailers so that they can benefit from their partner’s experience in the market and minimize the company’s risk in investment. In 1996, Carrefour Turkey established a joint venture with the Turkish holding Sabanci, creating CarrefourSA, while in 2003, the domestic retailer Kipa was acquired by British giant Tesco (Tesco-Kipa). Both retailers managed to make it to the top 10 retail companies in Turkey and both engage in further acquisitions. More recently in 2008, Moonlight Capital controlled by BC Partners UK acquired Migros, Turkey’s leading supermarket chain and started pursuing an aggressive expansion strategy nationwide. Migros, which currently has 1372 stores, targets to reach 3,000 stores in 4 years. Migros aims to open 400 new supermarkets within 2009.
Increase in computer ownership and internet access in the country means that people have greater access to internet shopping. Just like many supermarkets offer sales over internet, direct sales companies invest in developing their networks in Turkey. In 2007, e-Bay bought a minority stake of Gittigidiyor.com in order to further expand its online trading platform and offer a broader range of e-commerce services to Turkish buyers and sellers.
The consumer habits changed in Turkey as purchasing power of middle class increased. People became more aware of international standards and interested in high quality products and multinational fashion brands. In Turkey, half of the population is under the age of 25 and the younger population prefers to spend time and money, and socialize with friends at shopping malls rather than traditional shops. Many shopping malls opened in Istanbul and international companies were encouraged to enter the Turkish market thorugh modern retail channels. For example, Debenhams, Harvey Nichols, Douglas, Marks&Spencer, Tchibo, and Sephora opened stores in new shopping malls like Istinye Park, Cevahir, Kanyon and Astoria. Retail sector is not only growing by new store openings of foreign companies but also by new brands of local companies. Established by a member of Sabanci family, Gratis will be a chain store for personal-care products and daily necessities. After opening its first store in Metrocity. Gratis aims to open 20 stores till the end of 2009.
{mosimage}With the increasing consumer demand nationwide, shopping mall developers also turned their attention to other rapidly growing cities such as Ankara, Izmir, Bursa, Eskişehir and Antalya. Although these cities’ residents mainly shop through traditional shops, there is a strong growth expectation in favor of modern shopping as people welcome modernization with enthusiasm. Brands like Zara, Massimo Dutti, Pull and Bear, Oysho, Bershka of renown fashion group Inditex, Dorothy Perkins, Top Shop, and Miss Selfridge of Arcadia Group, Gap,Mango, Banana Republic, Benetton, and Lacoste are operating in the country with numerous stores. Some of them work in partnership with Turkish companies.
Retail market in consumer electronics tends to become more competitive with international new comers: Until a few years ago, TechnoSA was the only mega store in consumer electronics. After analyzing the great potential in consumer electronics, three major multinational retailers entered the Turkish market. Media Markt opened its first store in 2007 in Istanbul, followed by 10 more stores nationwide. Electroworld currently operates with 8 stores in Konya, Bursa and Istanbul. Darty has 13 stores nationwide. Another major player, Best Buy, is planning to enter the Turkish market as a foreign direct investment in the near future.
Retailing in Turkey is expected to grow over the following years due to increasing population, greater modernization and higher incomes. The young population of the country, more interested in fashion, electronics, and international products in grocery shopping will carry retail sector to international standards and attract more foreign direct investments into the Turkish market. Foreign investors should act fast and form their presence before the competition heats up
Ela Erozan Gürsel writes a weekly column named “Değişim Yelpazesi ” on global business trends for Dünya Gazetesi on behalf of Datassist for almost two years. Her feature topics include: green energy; climate change; impacts of financial crisis on companies, sectors and regions; innovative technologies in sciences, human resources and management; social networks transforming business and politics; changing dynamics of marketing and branding.
She also writes articles for international magazines published in Singapore.
Prior to her writing career, she worked at Datassist as a Project Manager in a project that combines human resources and mobile communications with the aim to connect blue-collar workers and employers through mobile phones. Before engaging in this exciting project, she was in pharmaceutical sales working for a multinational company. She graduated from American University, Washington, DC, majoring in International Studies with a concentration on International Business and Europe. She worked in Washington D.C. as an Account Manager at a boutique telemarketing firm that specializes in fund raising and publication renewals. She speaks Turkish, English, French, and Spanish. She currently resides in Singapore with her husband.
