A country that’s amix of modernismand Islam with a

population of overseventy million andestimated annual

income per capita ofUS$ 4,500.

A middleclass withWestern-style habitsand consumption:

this is the real target.This article is forbusinesses who

dare…

MARKETf o c u s

Globalisation has forced Western busi-nesses dealing only on the domesticmarket to be on the defensive. The cur-

rent situation now means we need to revisethe concept of the free market, turning it in-to a regulated system, and start doing businessabroad. The foreignmarket(s)must, therefore,be part of a new market positioning strategy.Hence this insight into the Turkish market.

DistributionAccording the latest ICE report (Italian For-eign Trade Institute), dedicated to Turkey, itemerges that Turkey has yet to benefit fromthe social/economic results of organised dis-tribution (as we know it in Europe): this is im-portant if we want to understand how to gen-der business on the Turkish market.

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32DIMENSIONE PULITO INTERNATIONAL

by Giovanni Carlini,foreign correspondent

TURKEY: seizethe challenge

Supermarkets and hypermarkets in the Westnow dominate the market (80% of the valueof all goods sold); in Turkey, on the other hand,this form of distribution has only a 30% shareof the market. The other 70% is held by localshops and markets, the latter still very com-mon, though the numbers are gradually falling(115,000 in 2006). Small “corner” shops withrestricted local clientele (serving a district or

Kipa (GB).The major Turkish names are: Sabanci, Koc(Migros/Tansas), Transturk Holding and FibaHolding. These Turkish groups have recentlystarted to form associated companies with for-eign groups, such as the Sabanci Group andCarrefour/Gima (France). Local businesses arealso starting to look abroad, moving onto theformer USSR markets (the Koc Group via itsRamstore chain has a huge presence in Rus-sia and all Central Asia countries).

Social/economic conditionsThis delay in adopting new trends (comparedto the West) is due to the deep-rooted Islam-ic religion that affects everyday life in Turkey(as in theMiddle Ages in Europe). It thereforealso leads to rigid distributionof income: Turkeyis a mix of modernism and Islam, with a pop-ulation of over seventymillion and an estimat-ed annual income per capita of US$ 4,500, stillwith marked unequal distribution of income,plus a tiny middleclass with poor bargainingpower. Only 5% of the population fall withinthe highest income bracket (ruling classes),while 15-20% belong to the middle classes,with Western habits and consumption: this isthe true target.In terms of consumptionmodels, Turkish fam-ilies spend 45% of their money on food, drinkand tobacco, 15% on clothing, 22% on trans-port, household items and services, health,

even just a city block), selling everything fromfood to detergents, newspapers to stationery.It must, of course, be remembered that nobusiness can hope to enter an Islamic coun-try (even if only a moderately fundamentalistone like Turkey) without the support of localeconomic forces and specialised agents andad hoc plans for Turkey’s distribution model.Since the “corner shop” is the main form ofdistribution in Turkey, we need to dust downthose oldmarketing techniques and customerloyalty/awarenessmethods used in the 1960s,when the shopkeepers would educate and ad-vice customers about what to purchase. Qual-ity for money, freebies and offers, packagingand a personal feeling are all part of this ap-proach.Retailing is, however, moving towards moremodern forms, mainly in the major cities likeIstanbul, Ankara, Izmir, Bursa and Antalya. In-vestments in recent years have also involvedsmaller cities. Buying habits are slowly chang-ing. Having said this, however, only roughly25% of all goods were sold in supermarkets in2006 while retail sales were worth some 30 -40 billion US dollars. Wholesalers and smallshopkeepers have now started to form cen-tralized unions and organisations for purchas-ing with the aim of competing with the super-markets and hypermarkets (unwelcome andbarely tolerated).As a result, organised distribution in Turkeyshould not be ignored.Western-style sales outlets are on the up in themajor cities, where consumers aremore awareof international trends, havemore disposableincome andbetter transport, letting them reachthe large stores and shopping malls. The lat-ter are mainly on the outskirts of town (Istan-bul, Ankara and Izmir), meaning there is aknock-on effect in other smaller cities nearby.Themain international hypermarket chains inTurkey areMetro (Germany), followed by Car-refour (CarrefourSA/Gimaof France) andTesco-

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33DIMENSIONE PULITO INTERNATIONAL

education and housing and the remaining 18%on cleaning products.

The new globalisationSeptember 11th, 2001, as we all know, was theday that the Western world saw the terrorist

COUNTRY INCOME PRO CAPITAItaly 17,000 US dollarsUSA 42,000 US dollarsChina 2,000 US dollarsTurkey 4,500 US dollars

MARKET f o c u s

enjoy a certain wealth) has led to an impres-sive series of speculative bubbles (oil, food,rawmaterials). There is now political and eco-nomic agreement at all levels for a new trendto regulate and give some order to globalisa-tion, until now seemingly direction-less. Thekey to this re-organisation is to stop thinkinginmerely economic terms, but to re-introducecertain cultural aspects. Hence the EU shouldnot be seen as a “hotchpotch” of different peo-ples, still bearing old grudges. Confirmationof this was Ireland’s recent rejection of the Lis-bon treaties, just as the French andDutch hadpreviously rejected the idea of a European con-stitution that forgot the cultural roots of theContinent. Every time there are European elec-tions or referenda, the EU is seen as a soullessentity, without a common cultural base, a uniononly in market and currency terms, but with-out any real economic, social, cultural andmil-itary policy. This is important in view of any“Turkey dossier”, since any expansion of theEU to include Turkey (a modern country, yetstrongly Islamic) becomes less crucial and im-

attack in the USA perpetrated by Islamic fun-damentalists. There was another such attacka few years later inMadrid and another (failed)attempt in London. On the 11th of Decemberthat same year, China joined the WTO andsince then globalisation (cheap goods enter-ing the West and millions of Asians and Indi-ans rising above the poverty line, now able to

Food, drinkand tobacco

45%Office/home

cleaningproducts

18%

Transport, health& education

22%

Clothing

15%

Turkish expenditure (goods sectors)

portant in the light of the new vision of Eu-rope, where people are already debating aboutthe sense of having united some 27 countries.Just imagine if a 28th were to be added, theonly reason for its inclusion being to snatch itaway from Islam.

Distribution by regional areasThe distribution and sale of imported con-sumer goods in Turkey can be either via directsales or via importers/wholesalers, who thenlook after the distribution of the goods usingtheir own network. In any case, all forms ofdistribution and sales are possible thanks tothe fact that direct sales to major retail chainsare on the increase.With regard to franchising, this ismainly a phe-nomenon of the clothing and catering sectorsin Turkey. The organisation of sales of localcapital investment goods uses the traditionalsystemof a network of local agents or, to a less-er degree, regional distributors and depots inmajor cities (but only in the case of small aux-iliary goods).

Capital investment and imported goods aresold according to the nature of the productconcerned, via importers/distributors or im-porters/wholesalers, who become the ownersof these goods and so are free to sell them viatheir own networks at the prices they decide.The grocery sector (food, cleaning and house-hold goods) is huge in Turkey, worth an esti-mated 40 billion US dollars a year. Regionaldistribution of consumer goods is generallyeffected by the producer via his own networkof local depots or local wholesalers/distribu-tors, responsible for a certain area (sometimes,but not always, on an exclusive basis). How-ever, some consumer goods (especially in thecase of small producers) are distributed di-rectly from the factory and main offices. Aux-iliary goods, on the other hand, may be soldthrough branches in themain cities (depend-ing on the type of product concerned, ofcourse): these branches are responsible forboth distribution and customer service. Turk-ish is currently the official language, thoughEnglish is the main language for foreign busi-

dozen or so firms dealing inmachine tools that offer anefficient sales network andcustomer service on a na-tional level, capable of satis-fying the needs of the pur-chaser and user on the local

market. The most important foreign compa-nies, and all those doing business on a regu-lar basis with Turkey, prefer to have their ownlocal Sales Office, that work either alongsidean importer or in direct contact with the endusers. This approach best suits themarket andlets foreign companies keep a close eye onmarket trends. Indeed, themarket can changesubstantially fromone geographical area to thenext (Turkey is twice the size of Italy) andmanysales of capital investment goods aremade us-ing joint-venture companies, buyback agree-ments or other forms of productive collabo-ration. It is therefore crucial for a business tofind reliable partners, though thesewill alwaysneed to be monitored.

Advertising and price fixingConsumer goods are advertised in Turkey us-ing the same traditional channels as in theWest:TV shots (many private TV companies have ap-peared in recent years), magazines and news-papers, billboards, directmailing, etc. The costof an advert in trade journals varies from sec-tor to sector and the circulation of the journal,though this normally costs less than placingan advert in the newspapers. Except for a fewbasic commodities, where the State fixes theprice and subsidises the producers, the selleris free to fix the price he wants for all othergoods. There are no limits or restrictionswhenit comes to commissions and so the rate canbe fixed at will.

A WORD FROM THE EXPERTSSerhat Ozer is a young Turkish businessmandealing in cleaningmachines (various brands)on the Turkish market.Ozer has a rare and fine sense of Eastern hos-pitality, due to which he always takes pleasurein inviting the foreigners hemeets during tradefairs around the world to come and visit hisfactory. Such a socially outgoing and intellec-tually fascinating character just has to be pre-sented to the international press as the refer-ence point for doing business in Turkey.

ness (sometimes French). Italian and Germanare rarely used.

Non-food retailingMajor DIY stores and office supply stores haveappeared over the past five years. Tekzen (Tek-fen), Koctas (Koc Group), Bauhaus and Prak-tiker are stores specialising inmetal equipment,furniture and construction materials.Metro&Real is now present in Turkey in thissector, as is Praktikerwith its stores inGaziantepand various other Turkish cities. Koctas (con-structionmaterials) of theKocGroup is spread-ing its operations in Turkey (DIY) following thefootsteps of TheHomeDepot (USA). Franchis-ing is mainly adopted in the clothing industry,though chains offering affordable prices haveyet to appear (Stefanel, Benetton, LCW-Waiki-ki, Zara, TommyHilfiger, Lacoste and Cacharelare currently active in Turkey). Turkish produc-ers, such as Ozdilek and others, are formingtheir own direct sales outlets (factory outlets).There is, at the present, no chain dealing inpersonal hygiene, over-the-countermedicinesand cosmetics, though such goods can nowbefound in specific “corners” inside hypermar-kets.The most important Turkish distributorsare: Ya?ar Birle?ik Pazarlama, Kovan Gida,Merkez Gıda Pazarlama, Istanbul Gıda DisTicaret, AtlantikGıda Pazarlama,GirisimPazarla-ma and P&G Pazarlama. There are also 60-70other smaller nation-wide distributors.Distributorswith foreign partners are: Unilever,Coca-Cola, Pepsi-Cola, Kar Gida, Uzay Gida,Ulker, Philip Morris and Toprak Gida.

Doing business with TurkeyEvery year tens of thousands of Turkish busi-ness visit themain foreign trade fairs, especial-ly those inGermany, Italy, theUSA, France and,more recently, Taiwan.The usual distributionchannel is that of an importer/agent. There arehundreds of such firms in Turkey, mainly in Is-tanbul, with sales networks covering the en-tire country. Much depends on the type ofgoods involved. For instance, there are only a

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MARKET f o c u s

Dama Da?ıtım, Pazarlama ve Ticaret A.?. Dis-tribution, Marketing &Trading Co. Inc. Thewebsite iswww.marinaku.com. Twelve yearson the market. The company philosophy canbe summedupwith the slogan “satisfied or re-funded”.We really mean this. Dama deals in manybrands. It produces nothing, but sells: vacu-um cleaners, carpet sweepers, window clean-ing equipment, cloths, electrical dispensers forpublic baths, floor polishing disks and otherproducts.”

What countries do you import from?“Reading between the lines, I can assure youI do not import from China. I represent topquality, good value brands in Turkey. Thanksto this, Dama is posed to become themost im-portant Turkish importer in such a vast mar-ket.”

How do you reach your target market?"We have two sales channels. The first: cus-tomers contact us directly. The second: we

What does temizlik makinesi mean (onyour website)?“The correct translation is ‘machines for clean-ing’. This industry has been active inmy coun-try for the last twenty odd years. The vacuumcleaner was the first machine to be imported.The sector has enjoyed rapid growth ever since,despite certain structural problems, yet to besolved. This means that the average Turkishfirm buys such machines abroad, but forgetsabout the spare-parts and customer service.This “distraction” is due to the fact that capi-tal is needed to run a warehouse and compa-nies in this sector normally run on a tight budg-et. However, this has been to my advantage,as I foundedmy own company in 1996 on theashes of other Turkish companies who hadfailed for this very reason.The strength of my company is its after-salesservice. I’m not just an importer/distributor,I’m also a sociologist, studying consumer trendsand thus placing me in the envious positionwhere I can listen and understand themarket,and act appropriately. My company is called

Serhat Ozer, ownerof Dama.

have a sales network called the Dama system.The core of thisDama system is continual train-ing of the sales staff (courses and work expe-rience, on site or at our HQ). All membersof the sales team are expected to do thehomework set after each seminar, as thishelps them understand the sales messagesand the methods we teach them.”

How is your company structured?“We have sixteen area agents, reporting toeleven supervisors, and fivemechanics offer-ing after-sales service. Then there are eightadministrative workers and three managers.In other words, more than forty people, plustwenty vehicles (trucks and vans)”.

Earlier you expressed a rare (thoughhealthy) hostility to Chinese products.Why?“To allow Chinese products to flood the Turk-ish market means not only returning to theprevious situation of imported foreign goodswithout spare-parts and after-sales service, but

also and most seriously allowing mediocregoods to enter our homes.Why shouldwe sella bad copy of an Italian or German productwhen the original also expresses its culture?China copies and reproduces, exploiting thepoverty of its workforce, thus exposing thiscountry to extreme social weaknesses that aresimply explosive.The speed at which China’s economy is grow-ing, in the presence of exceptional economicinequality, means that there will be an equal-ly rapid fall when conditions change, as has al-ready happened (the unresolved question ofTibet:merely suffocated). If wewere to acceptChinese goods, there would be no certaintyabout continued supplies of machinery andspare-parts and no guarantee about their qual-ity.”

What sectors are the most profitable forDama?“Our main sectors are: textiles, food, logistichubs, hotels and restaurants, cleaning contrac-tors, shopping malls and the car industry.”