Warc Blog

Foreign retailers struggle in Turkey

15 October 2013
ISTANBUL: Multinational retailers are struggling to compete with domestic rivals in Turkey, because of cultural differences, currency fluctuations and the fragmented nature of the market, local analysts have said.

As reported by the Financial Times, French retailer Carrefour recently gave up majority control of its local subsidiary to the Turkish conglomerate, Sabanci, while the German DIY chain, Praktiker, has closed its nine loss-making stores in the country.

Kipa, the Turkish subsidiary of UK retail giant Tesco, recently recorded a 13% drop in yearly sales and Dia, the Spanish supermarket chain, this year sold its majority stake in its local subsidiary to Yildiz Holdings, the Turkish food producer.

"I don't see much of a chance for foreign companies," said Haluk Dincer, head of retail and insurance at Sabanci, who explained that Turkey's fragmented market and successful local companies made it difficult for foreign retailers to consolidate.

Meanwhile, cultural differences about the presentation and preparation of food made retailing particularly difficult for foreign firms.

Philip Norminton, managing director of Nielsen Turkey, the market research group, pointed to Turkey's culture of cooking from scratch and the localised nature of grocery retail.

"Given the fairly homogenous food choices in Turkey from retailer to retailer, and a culture of scratch cooking, the expectation or need for own-label chilled and prepared food innovation is less," he said, arguing that this put global retailers at a disadvantage.

International chains also face strong competition from Turkey's traditional corner shops, which place much emphasis on attractive presentation of their merchandise.

Despite a slight decline in their market share, these local "bakkals" still account for about half of all grocery sales in the country.

Another challenge is the Turkish lira's volatility, according to analyst Melda Agirdas, which causes particular problems for electronics retailers relying on products bought in foreign currency.

As an example, UK electronics group Dixons last month announced that it was selling its loss-making ElectroWorld subsidiary to the Turkish retailer, Bimeks.

Despite the difficulties, however, Tesco has expressed confidence that its Kipa subsidiary will make progress and states that it views the Turkish market as a good opportunity.

Data sourced from Financial Times; additional content by Warc staff

 
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