With the size of the market widely expected to double over the next decade, Turkey represents a major opportunity for retailers. Yet with recent years seeing big internationals pulling out or downsizing their participations, and as the pace of economic growth slows, consumer confidence is weakening and some challenges do remain. At the same time though, local groups have thrived, with this applying not just to modern retail, but to traditional outlets as well. Turkish retail therefore demonstrates that while strong GDP and population growth can provide some good fundamentals, flexible management, good organisation and a deep understanding of local market and habits are also invaluable in determining which retailers will thrive.

Facts & Figures

The fundamentals of the Turkish market support long-term growth of the retail market, although economic growth has slowed down in recent years – the GDP expanded 2.9% in 2014, according to data from the Turkish Statistical Institute (TurkStat). The mean annual GDP growth rate over the 2003-13 period was 5% though, despite the global economic downturn. Per capita GDP has risen from $4565 in 2003 to $10,404 in 2014. Population expansion has also driven this growth. TurkStat data show Turkey’s population at 77.7m at the end of 2014, giving an annual growth rate of 1.3% – down from 1.37% in 2013. The median age in 2014 was 30.7, while in 2008 the median was 28.5 years. Thus, while the population is ageing, almost half of all citizens are under the age of 30. According to a report by Banco Bilbao Vizcaya Argentaria, by 2020 Turkey’s affluent and medium-upper middle class will account for some 45% of the population – up from 27% in 2010. Much of the country’s growth has been consumption-driven, too. Household consumption was up 4.6% year-on-year in 2013, and 1.3% in 2014.

Due to recent changes in TurkStat’s statistical methods, however, comparing retail market data directly between 2013 and other years has become more problematic. The figures in any case have long been inexact due to the size of the grey economy, with many small, corner-shop retailers operating in an only semi-registered fashion. The government is making efforts to bring these traders into the system, however. One major thrust in this in recent times has been that of increasing the usage of electronic data exchanges. When even small local stores have electronic card readers, for example, it is more straightforward for the tax authorities to bring that store into the system. The available data on the retail market is impacted by the relative effectiveness of these measures over time, though. Nonetheless, according to the Trade Council of Shopping Centres and Retailers, on the basis of household expenditure, total retail turnover for 2013 was $285bn – an increase from $171bn in 2010. Of this, around $100bn, or 35%, was in modern retailing, up from $75bn in 2010 (see analysis). Thus, the numbers would tend to indicate growth in the modern and traditional retail sectors has been high over recent years, although proportionately, the modern sector has been growing faster. This is especially so in food, where the share of supermarkets in the total consumable goods market, excluding cigarettes, rose 57% in the last 10 years, according to a November 2014 US Department of Agriculture (USDA) report. The expected decisive shift to modern at the expense of traditional has been likely offset to some extent though by an important characteristic of the Turkish market. Many prefer to shop for groceries in a local bakkal (a corner shop that is often family run) rather than the local supermarket, due to strong local loyalties and communal and familial links.

A New Law

The government seeks to protect small-and medium-sized enterprises from larger chains via a long-awaited new retail law – the Law on Regulation of Retail Trade enacted in January 2015. The law limits the ‘days payable’ limits for organised retailers, which may oblige them to hike prices. This is because many of the larger retailers sell in cash, but pay in terms; shortening the days payable will force them to generate more short-term operating income. This would negate the competitive advantage large stores are able to leverage due to economies of scale – an advantage that has historically tended to offset the benefit the traditional stores gain from operating sometimes outside the tax system.

The first set of regulations to govern the sector, the new law regulates the establishment, operation and auditing of shopping malls, retail dealers, department stores, chain stores, artisans and craftsmen, giving retailers one year and, in some instances, up to two years, to bring their operations into compliance. The regulation aims to facilitate the opening and operation of retail businesses, establish an efficient and sustainable competitive environment, protect the consumer, achieve balanced growth of stores and organise the operational relationship of stores among each other, with the consumer and with suppliers. A retail information system and a sector database will also be formed. The law also states that space for artisans and craftsmen must be allocated in shopping malls and at least 1% of shelf space shall be reserved for local products.

Market Segmentation

TurkStat’s retail sales volume index shows steady improvement over the years since its 100-point base line in 2010 – hiking to 125 in February 2015 on a calendar- and seasonal-adjusted basis in constant prices, having increased 2.9% compared with February 2014. The biggest hike has occurred in the non-food segment (except automotive fuel), with the index on this rising from 100 in 2010 to 129.1 in February 2015. Food, drinks and tobacco, meanwhile, climbed to 118.4 over the same period. Within the nonfood segment, the top three growth areas in retail over the last few years have been internet and mail order retail, which stood at 217 in February 2015; second, textiles, clothing and footwear – rising from 100 to 155.7; and then computers, books and telecommunications equipment, with these rising from 100 to 124.9. E-commerce was a highly marginal activity only a few years ago, which illustrates the changing tastes and patterns of behaviour of Turkish consumers, as they become wealthier and more technologically connected.

Discout Store Success

The Turkish consumer remains highly price-conscious, though. This is reflected in particular in the food segment – which is still the largest retail area, with some 62% of all stores – and with the remarkable success of discount supermarket chains. There were 149 chains (those with more than 10 outlets) of supermarkets of all kinds as of October 2014, according to a USDA report, with the top-three national discount chains operating around half the total number of 18,960 supermarkets. The largest discount store in terms of branch numbers, BIM, saw 20% year-on-year revenue growth between FY12 and FY13, along with 25% net profit growth. In 2014 the chain’s net sales rose by 22% and net profit fell 4.3%, while it had 4452 stores across the country as of October, up from just 21 when it started in 1995. It also now operates in Morocco and Egypt. The chain has been a pioneer in Turkey for the no-frills, hard-discount model.

The second-largest discount chain is A101 Yeni Ma ğazacılık. Founded in 2008, this has expanded aggressively since, with 3427 stores as of October 2014. Turnover in 2013 was TL3.2bn (€1.1bn). The firm saw one of its shareholders, Bank Asya, exit in April 2014, as part of a capital raising exercise by the bank.

Third on the list of discount chains is Şok Marketler, which also started business in 1995. This had 2216 stores as of October 2014. Şok is owned by Yıldız Holding, which, as Yıldı z-joint venture between Spanish supermarket chain Dia and Turkey’s Sabancı Holding, for some $177.8m. DiaSA’s stores were rebranded as Şok stores.

The success of the three big discount stores has also attracted other outfits. In 2013 Ekonomi and UCZ entered the market, hoping for a slice of the pie. As of October 2014 Ekonomi had 1060 stores and UCZ 1430.

Yet while the big three discounters crowd the top end of the food business, a non-discount business remains number two in terms of turnover: Migros. Originally a Swiss entry in 1954 – and the first foreign supermarket in Turkey – the Koç Group took a majority stake in it in 1975. In 2008 Koç sold the chain to the UK-based BC Partners private equity fund. Migros had run Şok too, selling it to Yıldız in 2011. The chain’s turnover in 2013 reached TL7.1bn (€2.5bn). In early 2015, it was confirmed that Turkish Anadolu Group is buying a 40.25% stake in the firm from BC Partners. Although Migros had international ownership, its management has been entirely Turkish. This is a point often stressed by analysts as explaining why the chain has been so successful, while other international chains have not done so well. Indeed, 2013 saw not only Dia exit the market, but the UK’s Dixon’s – an electronics and electrical (E&E) goods retail chain – also announced it was selling its loss-making Turkish interest, ElectroWorld, to Turkey’s Bimeks – which also purchased French E&E Darty’s Turkish operations – during the same year.

In 2013 French multinational retailer Carrefour also reduced its holding in its Turkish operation to 46.2%, selling 12% of its shares to partner Sabancı Holding for €60m, giving the local conglomerate control of the chain, while Germany’s food retailer, Real, sold up to mainly Ankara-based chain Be ğendik. Meanwhile, negotiations started in 2013 over the sale of the UK firm Tesco’s Kipa subsidiary in Turkey ended in May 2014. Tesco had been talking with potential partners to sell its loss-making subsidiary. The company said it would accelerate plans to “focus the business on its heartlands” at its profitable stores around the Aegean and Izmir, which would suggest the group is likely to close stores in the east of the country where the brand has not taken off, as the company said it wanted to minimise capital spend and improve profitability.

The reasons for these withdrawals are partly internal to the particular companies, but also to do with the peculiarities of the Turkish market. In a city such as Istanbul, where traffic and transport are major issues, few consumers are attracted by the idea of visiting a large, out-of-town hypermarket.

One other result of local success has been expansion abroad by Turkish retailers. Özdilek Group, a home textiles company, opened a store in London’s Westfield Shopping Centre in 2011, while Turkish bagel store Simit Sarayı and café chain Kahve Dünyası opened a store each in London in 2014. Fashion brands Koton and LC Waikiki are also reportedly looking for European and Middle Eastern outlets. Some 84 Turkish brands have 1951 outlets in 90 countries, as reported by the United Brands Association.

March of the Malls

Meanwhile, the number of dedicated retail locations is expanding exponentially, with some 76 new malls in the pipeline as of 2014, nationwide, according to Jones Lang LaSalle research.

In 2014 total supply in the shopping centre segment reached 9.9m sq metres in 350 malls, with 635,000 sq metres of space added during the year, according to real estate firm Cushman & Wakefield. New supply growth slowed down in 2014, as close to 1m sq metres were added the previous year, however, another 2.3m sq metres of retail space are expected within the next three years. One of the recent trends with shopping centres has been the spread of these to secondary cities – 2013 saw two complete in Gaziantep, for example, along with new centres in Şanlıurfa, Kahramanmara ş and Samsun. The second trend is towards more exclusive outlets in the more developed market of Istanbul. The Zorlu Centre, for example, which was also completed in 2013, now houses a variety of luxury outlets, initiating a new wave of exclusive, high-end retail malls.


With much new retail space coming on stream, Turkey’s retail market remains buoyant. The slowdown in economic growth in 2014-15 will likely impact this, however, as might political uncertainties in the run up to general elections. Traditional retailers too may see their share of the market continue to decline. For foreign investors, the lesson of recent times would appear to be that retail businesses still need a good dose of local knowledge, even in these times of globally integrated business chains. Good geographical positioning and strong local partnerships may therefore be the way forward. At the same time, Turkish retailers are increasingly on the lookout abroad for opportunities – and additional global partnerships.