The Business Year

Hulusi Belgü

TURKEY - Tourism

Shopping Spree

President, the Council of Shopping Centers — Turkey

Bio

Hulusi Belgü graduated from Istanbul University with a degree in Business Administration in 1988, going on to obtain MBAs in Marketing and International Business from San Diego University in 1990. He is currently the President of the Council of Shopping Centers — Turkey, and has a professional background in trade and real estate.

"One of our main goals is to attract visitors from neighboring countries like Azerbaijan, Bulgaria, and Greece."

How has the Council of Shopping Centers (AYD) in Turkey supported retailers, and how has the retail sector changed locally since 2008?

When we encountered the financial crisis in 2008, there was a big clash between tenants and shopping center investors. Unfortunately, it was a crisis for everybody because the euro exchange rate shot up a lot, while the economic situation of Turkey collapsed for a short period. However, the situation soon recovered. When you look at recent years, Turkey was the least affected country in the region by the global financial crisis. Everything is still growing. Only in 2008 did we experience negative growth. When we had the economic crash, we tried to find common ground to help our tenants. You cannot close your eyes and demand them to pay the rent. Somehow, you should support them and help them to survive. Right now—and this is a common practice—we are following the effort index, which is the turnover versus the rent levels per square meter. This gives you an idea of how much it should be. In a shopping center with below 15% rent versus turnover, there is no problem at all. Over 15% and there may be some problems. Of course, you should consider what kinds of products the retailers are selling. It might not be just the result of an economic crisis; it might be a case of brand mismanagement. We have supported our tenants and retailers a lot in this aspect. With good management, we have given discounts to some of the good retailers, even up to 40%, and they survived. After 2008, we started to return to our normal rent levels. However, this is still the practice used in new shopping centers. Usually in the first three years of a new shopping center, retailers don’t perform very well. You need people to know the shopping center, then they will come later on and spend money. If you look at this index now, you will see that there is continuous growth in each sector every year. If you compare the numbers of the SC Sales Index, you can see how the retail industry has changed from 2008 to 1H2014. For example, in 2011 we started at 100 and now the sales index is at 163, indicating 63% growth.

What motivated the changes in the shopping center industry in Istanbul?

In the shopping center industry, 30%-35% of investors are foreign. We have lots of multinationals in Turkey, and Turkey is continuing to attract great interest amongst international investors. For example, Blackstone has just purchased Multi Development, simply because of its Turkish operations. Turkey is the biggest part of Multi. These foreign investors are also a part of AYD, and of course we are encouraging foreign investors to come and invest locally. The total foreign investment in shopping centers is around $12 billion right now. As AYD, we are supporting conferences and are actively attending meetings to show and explain the attraction of the retail business in Turkey.

“One of our main goals is to attract visitors from neighboring countries like Azerbaijan, Bulgaria, and Greece.”

How significant are events like the Istanbul Shopping Festival?

One of our main goals is to attract visitors from neighboring countries like Azerbaijan, Bulgaria, and Greece. We also have very good relations with Kazakhstan and Uzbekistan. For Russians, Turkey is a very popular country to visit, so we want as many tourists as possible to come here and embark on shopping sprees. It will definitely help to expand our business and grow the Turkish economy. This year was the fifth year we have done the Istanbul Shopping Fest. Three associations founded this festival: the United Brands Association (BMD), the Trade Council of Shopping Centers and Retailers (AMPD), and AYD. In 2014 the scope changed and the Istanbul Chamber of Commerce is involved. Now it is not just the shopping centers organizing the event, but also the retail shops on the streets. We have the city and the municipality helping us a lot. I think it will continue to grow in the coming years because if you only had retail industry organizations supporting this event, it would grow slowly.

Can you talk about some of the challenges in the sector?

Unfortunately, there has been no proper planning up until now, and not enough regulations have been created. The city was not designed like a European one. Unfortunately, the regulations were weaker than in European cities. However, the new municipality and the government is now trying to fix this situation, but it will take time. There is one thing missing in Turkey; we don’t have that many piazzas, like in Italy, the UK, or France. Because of poor urban planning, we don’t have that many open spaces in Turkey. In a way, shopping centers are taking the place of these piazzas and squares. People are getting together in shopping centers to fill that need. In Turkey, there is a demand and need for people to gather together within the city. Because of that, you see many shopping centers in the city, and this can create traffic problems. But, at the same time, this is a need. Because of the bravery and speed of Turkish entrepreneurs, you can find six or seven shopping centers right next to each other. It is very interesting, but all of them are working! They are differentiating themselves through their brands. Some of them specialize in high-end brands, like Kanyon, and some like MetroCity feature brands for the C or D class customers. For example, Forum Istanbul has 2.5 million people visiting a month, and they are spending money. They are not even C class, but D or E customers. It has very high footfall, meaning you don’t have to just aim at the high-end brands. If you differentiate your shopping center accordingly, you can still survive. However, there is a need for good planning from now on, so as not to make these mistakes anymore.

Is the retail sector saturated yet?

No. For example, Istanbul is still receiving a significant amount of migrants from the provinces. There are new, growing areas. And in these places, there will be new shopping centers. However, there are some locations in Istanbul that are saturated, like Büyükdere Caddesi. It would be crazy to have another shopping center there, but the investors are still trying. We have problems in Ankara and Denizli, where the saturation level is much higher. Still there may be a way to sort out. By all manner of means, the new shopping centers that are likely to be in those areas should carry an artistic architectural identity besides hosting a hearty, filling brand mix. The thing is, to have a good shopping center, the location is very important. You have to have a good location and good planning. The other thing is the brands and the architecture, which are also very important. Right now, Turkey is overcoming these architectural issues. As well, you need to have good management. To achieve this, you need to have well-trained people, and we are trying to help our members train their employees to increase sales effectively.

© The Business Year – October 2014

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