Turkey is one of the many jurisdictions in which Alacrity, or our affiliates operates a business accelerator.  This global operation provides us interesting and unique entrepreneurial insights.  In Istanbul Turkey, Alacrity is partnered with the NETAS fund, and one of their companies, Pisano is a powerful Customer Experience Management tool that collects and analyzes Real Customer Feedback.  We asked the co-founder of Pisano, Özkan Demir if he would be interested to share insights into the Turkish market opportunity.  

Retail Sector in Turkey Review Series: Supermarkets and Discount Stores

The Potential

Teeming with potential, the retail market  opportunity in Turkey is worth analyzing.  Considering that Turkey is in an interesting position geographically and economically, and is also poised to formally join the EU in the near future, potential abounds. With ascension comes change and meteoric growth. For the retail sector in Turkey, this growth will result in massive profit opportunities, and as such, the situation is worth more than paying attention. Yet, a lack of industrial reports and insights stand in the way of formulating action plans. With tremendous “on the ground’ insights and visibility into the opportunities, we are going to embark on a series of industrial reviews on the general retail sector in Turkey.

In our first review, we are going to talk about the food retail industry; focusing on supermarkets and discount stores.  In Turkey, food retail is the largest retail branch in terms of total sales volume and growth rate of its market share size. Structurally speaking, both modern (or organised) and traditional retailers exist alongside each other. Although traditional retailers like bazaars, mom-and-pop stores, and small unaffiliated stores continue to hold their weight, modern retailers already have a 45% market share with continued growth expected.

 

General Situation of the Food Retail Industry

According to 2014 data, the top 100 retail companies in Turkey had a combined total revenue of 83.4 billion TL ($27.1B USD). Food retailers contribute nearly half of this amount, with 17 supermarket/discount store chains making up the top 100 companies and 7 chains in the top 10. Currently, there are 152 modern retailers in the Turkish food retail sector. Out of 152, 129 operate locally and 23 operate nationwide. Out of these 23 nationwide brands, 8 are publicly traded companies.

In September 2015, BIM was the leader of both its own modern retail subgroup and retail sector as a whole with its 12.89 billion TL (approximately $4.2B USD) sales revenue. Coming in at second place, Migros group (Migros, Ramstore, Tansaş, Macrocenter) reached 7.01 billion TL ($3B USD). It must be noted that 85% of Kiler’s shares were acquired by CarrefourSA in 2015, so.

Sales Revenue and Market Share of Top 6 Food Retailers in Turkey

Company Name Sales Revenue 14/09 Sales Revenue 14/12 Sales Revenue 15/09 Market share 14/09 Market share 14/12 Market share 15/09
BİM 10.7 billion TL

(app. $3.5B USD)

14.46 billion TL

(app. $4.7B USD)

12.89 billion TL

(app. $4.2B USD)

24.5% 25.0% 27.2%
Migros 6.03 billion TL

(app. $2B USD)

8.12 billion TL

(app. $2.6B USD)

7.01 billion TL

(app. $2.3B USD)

13.8% 14.0% 14.8%
CarrefourSA 2.29 billion TL (app. $0.7B USD) 3.12 billion TL (app. $1B USD) 2.75 billion TL (app. $0.9B USD) 5.3% 5.4% 5.8%
Bizim Market 1.68 billion TL (app. $0.5B USD) 2.28 billion TL (app. $0.7B USD) 1.87 billion TL (app. $0.6B USD) 3.9% 3.9% 4.0%
Kipa 1.74 billion TL (app. $0.5B USD) 2.25 billion TL (app. $0.7B USD) 4.0% 3.9% 0.0%
Kiler 0.73 billion TL (app. $0.2B USD) 0.99 billion TL (app. $0.3B USD) 0.94 billion TL (app. $0.3B USD) 1.7% 1.7% 2.0%

 

Discount Stores

Due to a recent fundamental change in consumer purchasing behavior, a special subgroup of modern food retailers is becoming more popular in Turkey: Discount stores. The consumers no longer wish to spend time in gigantic hypermarkets; they now prefer to find what they need and leave as fast as possible.

Large retailer’s discount store strategy is built on setting up shops in smaller spaces which measure 200-300 m2 and can be easily found in every neighborhood. It seems to work well as discount stores reached a market size of approximately 15 billion USD and 9,000 sales points in 2013.

There are other strategies at play with discount stores. They produce “private label” goods under their own brand to cut down on the production costs. For example, according to the “Retail Sector Assessment 2013” report prepared by Deloitte Turkey’s Corporate Finance department, BIM earns 66% of its revenue through its “private” label goods while it’s 35% for A101, another discount retailer. Additionally, discount retailers employ less staff than hypermarkets, significantly decreasing their expenditures further. Lower costs mean lower prices; all of these seem to work well in the expanding Turkish discount industry.

 

Trends: The Near Future

Since food retailers are the biggest player in the retail sector in Turkey, it would be logical to base sectoral expectations on the trends they experience. Food retailing is getting more widespread while experiencing growth in both its demand and supply. The accessibility of products and micro supply chain management are the key factors behind this. When we take a closer look at the current situation, we also observe harsh sectoral competition and the acquisition activity of by larger companies to realise their growth goals and to increase their market share.

Brands that started developing under the smaller yet more common market model are the current market leaders. Their continued dominance in the market is the evidence of this strategy’s effectivity. For example, BIM held 4,916 stores nationwide in 2015, followed by A101 and Şok. Taking the success of these brands into account, we can conclude that market share and sales revenue are largely determined by the number of stores.

Affordability in terms of prices and wide supply chain networks are the other major determinants of market share. To improve on this front, examples like CarrefourSA acquired local chains to be able to compete with the other giants in the sector. We can expect the same trend to continue with even larger acquisitions and mergers in the coming years.

Turkish food retail industry as a whole is expected to grow 8% between 2013-2017. This growth will be fueled with the expansion of modern food retailers, especially with the discount stores. Food retailers’ own growth potential positively reinforces expectations about the general retail sector in Turkey.

 

Turkish Market Opportunities

As a Customer Experience Management Platform focusing on retail sector in Turkey, we highly advise all entering companies to first identify their target customer segments and gather information about the market conditions specific to the Turkish case. This would help in formulating an action plan to base your operations. A crucial point during this process is reaching your customers and getting their feedback. Because, pure industrial numbers and data cannot tell you what is going on the ground level. Collecting and processing customer insights is the primary solution to this challenge. After all, the shifting, and quickly evolving marketplace growth is being driven by a dynamically and rapidly evolving client base.  More than many Western European and North American markets, Turkey’s retail opportunities are intrinsically tied to bridging the online-offline dynamic, and leveraging mobile technologies to drive offline activity.   

The entire retail sector is loaded with potential.  But within the sector, some areas have larger upside than others.  To help readers understand each area of opportunity, we will be talking about the fast food restaurant chains in our next article with other retail sectors following up.

 

Sources

Retailler: http://www.retailler.net/iste-turkiyenin-100-perakende-devi/

ATIG: https://www.atig.com.tr/arastirma/raporlar/tr/perakende_sektor_raporu.pdf

PeraPost magazine: http://www.perapost.com/

Dünya: http://www.dunya.com/ekonomi/yabanci-cekildi-039indirim039-pazari-yerlilere-kaldi-haberi-217283

Alan: http://www.alanyatirim.com.tr/Uploads/Document/d5058ca0-4510-4c81-b82f-3e74c42bf996.pdf?v-635860588552282531

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