2009: Turkish retail still unconquered by foreign chains

Turkey is gradually opening for foreign investment, also in the field of retail. Foreign retailers’ entrance into Turkish retail market is ongoing, despite the fact that the country’s economic history is turbulent, traditional retail is still very strong and it was domestic retailers who triggered a turn info modern retail and nowadays keep their predominance in the market. Foreign retailers are getting more and more experienced and penetrate the country leading to a further modernization of the Turkish retail market.

According “Retail in Turkey 2009”, the recent report by an analytical company PMR, the Turkish retail sales to have amounted to YTL 225bn (€118bn) in 2008, posting a growth of over 11% on 2007. In comparison with countries of the European Union, the retail sector in Turkey is still relatively underdeveloped. Despite the fact that today’s market leader, Migros Turk, was set up in the late 50s of the twentieth century, some other prominent local companies were established in the 80s, and despite the entry of few worldwide-known retail chains as early as in the 90s, a significant portion of the retail market still remains in the hands of independent retailers. In addition, about one-third of retail sales are still controlled by traditional channels, like bakkals (small mom-and-pop stores), open markets and street vendors. As such it constitutes a promising market for the development of modern retail, which despite the forecast market downturn in 2009 will enable retailers to further expand, both organically as well as on account of mergers and acquisitions.

The top 10 largest retail companies in Turkey, almost all of which are of domestic-origin, account for less than 10% of retail sales in the country, according to PMR data. Nevertheless, concentration in the Turkish grocery retail is expected increase rapidly during the next few years, chiefly at the expense of small local players and unorganised formats.

So far quite a few of the large Europe’s retailers have managed to open their stores in the country and operate successfully. many develop in Turkey in the form of joint ventures. They co-operate with experienced Turkish retailers so that they can benefit from their experiences in the market to minimize the company’s risk in investment. One of prominent examples are to be found in the grocery market. 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 the British Tesco (Tesco-Kipa). Both retailers managed to make it to the top 10 retail companies in Turkey. Both engage in further acquisitions.

The development of foreign retail chains and further modernisation of Turkish retail is adjoined by the development of availability of modern retail space. For example, numerous foreign fashion chains including Benetton, Levi’s, Zara, Mango or C&A, of the world’s renowned fashion groups (such as Inditex, Arcadia Group, GAP Inc) are already operating in the country. Again, many develop in cooperation with local or experienced companies; brands are being developed by franchisees (such as Fiba Holding, Alshaya Group or Park Bravo).

The Turkish shopping centre market has been highly active in the 2006-2008 period, with Istanbul being the hot spot. This is not surprising, as the city is the largest metropolis in Turkey and is situated in the most economically developed western part of the country. In 2005 the city saw the launch of the largest shopping centre in Europe – Cevahir Mall – offering a close to 350,000 m² of space for rent.

Recently, as opportunities for new schemes are becoming more limited in Istanbul and developers are turning their attention to other cities. In fact, the capital city Ankara and a number of secondary cities - Izmir, Bursa, Antalya - already have a significant representation of shopping centres. Nevertheless, almost half of the provinces in Turkey do not have any modern concept shopping centres.

In all, considering relative underdevelopment of the Turkish market, the country’s large population as well as shopping schemes developers’ plans, the potential for spreading the modern retail formats is vast. However, this does not only mean opportunity for foreign brands since already experienced domestic companies, many of which running a modern style chains, will surely fight to defend their leading positions. One is sure, the market will not let us be bored.

This press release is based on information contained in the latest PMR report entitled "Retail in Turkey 2009. Market analysis and development forecasts for 2009-2010".

PMR Publications www.pmrpublications.com is a division of PMR, a company providing market information, advice and services to international businesses interested in Central and Eastern European countries and other emerging markets. PMR key areas of operation include market research (through PMR Research), consultancy (through PMR Consulting) and business publications (through PMR Publications). With over 13 years of experience, highly skilled international staff and coverage of over 20 countries, PMR is one of the largest companies of its type in the region.