Two Minute Tour: Turkey

The Numbers

Located at the crossroads of Europe and Asia, The Republic of Turkey has one of the fastest rising economies in the world with a GDP that grew by 8.9 percent in 2010. With 73 million residents, it’s the 18th largest country in the world by population. Approximately 60 percent of residents are under age 30, creating a young and increasingly affluent market. An improvement in consumer purchasing power and a strong labor market are leading to a boost in retail expansion. Total rentable area in the first quarter of 2011 was 2.8 million square feet, compared to 882,640 square feet in 2010, according to Jones Lang LaSalle.

The Hotspots

Most development can be found in the country’s three largest cities – Istanbul (13.1 million), Ankara (4.4 million) and Izmir (3.4 million). Shopping mall development has grown from 236 to more than 260 centers in the last year, with 100 new malls under construction. According to the Shopping Center Investors’ Association (AYD), 58 percent of Turkey’s shopping malls are located in Istanbul and Ankara, with the rest spread out in 44 cities. In Istanbul, IstinyePark, Kanyon and Cevahir Mall are three must-see locations. Marmara Park, Sapphire Carsi and Demirorem Istiklal are among the new malls hitting the market this year. On the other side of the historical spectrum, The Grand Bazaar, which opened in 1461, houses more than 4000 shops in a market-style setting.

The Pulse

Turkey jumped eight spots into the top 10 of developing markets in A.T. Kearney’s 2011 Global Retail Development Index. Regional and local retailers have expanded by 50 percent in the past two years. Some of the strongest regional players include discounter BIM, food retailer Migros Turk and Carrefour (in partnership with local conglomerate Sabanci Holding). Global brands, such as Harvey Nichols, Zara, H&M, Starbucks and IKEA, already have a presence in the market, and fast-fashion retailer C&A says it will add 10 stores to its existing store base of 24 in coming years. Notably, Best Buy exited the country earlier this year, saying its stores did not meet its return on investment threshold.

The Obstacles/Opportunities

While there are no legal barriers for international companies to invest in Turkey, it’s important that brands entering the region understand the country’s retail heritage. “Turks have a very sincere relationship with their neighborhood or community vendors and may subconsciously expect a similar relationship with today’s mass merchants,” says Kadircan Erkiralp, founder and managing director, Hyper Marketing (Istanbul, Turkey). Outside Turkey’s biggest cities, nearly half of the country’s cities do not have a shopping mall, so watch for mall investment to begin shifting to Turkey’s less populated regions in coming years. Peter Dixon, senior partner, New York-based Prophet, also sees an aspirational middle class with a thirst for participation in world culture as one of the biggest growth areas. “There’s an opportunity for lots of brands to get in early,” he says.