3 Trends in Turkish Retail

Retail Series: Turkey 2019

Three main trends that will change the rules of the Turkish retail sector in 2019.

A currency shock, diminishing purchasing power, soaring inflation, and persistently decreasing consumer confidence have all contributed to the mayhem experienced by the Turkish Economy since August 2018.

Growth rates in the economy don’t seem to be anywhere near what they were five years ago, and the dependence on imported raw materials to maintain production has rendered profitability insufficient in many industries.

The resulting detrimental impact both on consumer confidence and purchasing power in almost every sector has created stagflation which seems set to remain for a long time.

With over ten years of low interest rates now at an end, the Turkish retail sector is facing unprecedented challenges.

The ‘whatever goes and ever-lasting expansion’ type of retailing is over, and now companies are looking to exceptional planning and organization, increased digitalization, and a focus on customer service in order to stand out from the crowd.

But despite the grim outlook, the retail sector—being one of the biggest engines for the economy and employing over 1.9 million people—is still expected to grow by 10% by the end of 2019.

These are three main trends that will change the course of play for Turkish retail sector and increase profitability in 2019 and beyond.

Private Label

Also known as ‘phantom brands,’ private label products are sold by retailers with their own packaging. For example, Migros sell branded confectionary items such as Ülker and Eti chocolate, but also sell their own discounted Migros Chocolate.

The differences in prices can go as high as 50% depending on the product quality.

Discount retailers such as BİM and A101, with more than 12,000 sales points across Turkey, are the main companies implementing the ‘private label’ strategy over many years.

This strategy has helped successfully place them in top five retailers by revenue in 2018.

This is not a new approach, but is highly effective, particularly in the times of economic turbulence when consumers tend to budget more under the tightening grip of inflation.

Currently 25% of food and beverages sold are private label products, and this market is expected to grow by 50% by expanding into cosmetic, electronics, and service sectors in 2019.

Rise of Omni-Channel Retailing

E-commerce is rapidly growing and has reached tremendous market shares in retail over the past five years.

Brands in Turkey have rapidly adapted to this new trend through multi-channel sales activities.

There is, however, a new approach being embraced by mega retailers; omni-channel e-commerce. So what is the difference between omni-channel and multi-channel retailing?

The multi-channel e-commerce model allows customers to purchase on different platforms such as Facebook, the brand’s own web page, mobile applications, or physical stores, but these different platforms let customers experience a variety of customer experiences, offers, payment methods, and prices.

Omni-channel e-commerce, however, is a more unified sales and marketing approach that offers customers a seamless experience.

To put it simply; all offers, payment methods, discounts options, and loyalty points would be available across each of the sales channels.

A-Commerce (Automated Commerce)

This new phenomenon is considered to be one of the biggest milestones for the retail sector, and may forever change consumer behavior as we know it.

The automation of the retail process enables retail brands to offer completely personalized and exclusive products and services by using insight from “Big Data.“

It is common knowledge that every click we make and every website we browse is being tracked and saved by Big Data. This data then is used by algorithms to work out what, how, and when we are likely to buy.

But through “A-Commerce,“ customers can find lower prices or bargaining options.

Imagine you are in search of a flight ticket with a pre-determined budget of EUR250. If the website is an A-Commerce platform, it can buy the ticket on the indicated budget and for certain date and time for you whenever it becomes available.

This essentially automates the process for consumers while staying within the limitations of their purchasing power and schedule.

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