OBG talks to Mehmet Nane, President, Shopping Centres and Retailers Association

Interview: Mehmet Nane

What key consumer trends have been the main drivers of growth in the retail industry?

MEHMET NANE: Strong demographics and sustained economic development have played crucial roles in the dynamism of the retail industry. With over 700,000 young professionals entering the job market each year, the number of potential consumers has increased dramatically, as has the demand for new shopping outlets. This trend has been particularly strong in eastern regions where fertility rates are higher and income levels, driven by a decade of sustained growth across the country, are set to catch up with those of western Turkey. Furthermore, what sets young Turks apart is their propensity to spend a higher proportion of their income than their European or North American peers. The market for mortgages remains underdeveloped and university tuition fees are very low. As a result, private debt in Turkey is much lower than in other economies, meaning that individuals are more likely to save less and consume more.

How has the multiplication of big shopping malls across Turkey affected small retailers?

NANE: The debate around this issue has not only been highly controversial, but also very political, in the sense that both parties have used different figures to support their respective views. Depending on whether one looks at changes in the number of small shops or the number of openings, one gets a very different idea of what is really going on. However, I think that this debate is overly contrived. Ultimately, the consumer is in the driver’s seat and no one can really influence consumer behaviour so easily. Shopping malls and small shops offer different advantages, and many consumers continue to go to both. Shopping malls offer many facilities of particular interest to large families trying to make the most of their time together, including cinemas, restaurants, boutiques, supermarkets and cafes. Small street shops ( bakkal) also remain very popular for consumers who value proximity and more flexible opening hours.

To what extent is e-commerce development posing a serious threat to traditional retailers in Turkey?

NANE: E-commerce is likely to continue growing significantly in Turkey, and the transformation from bricks to clicks is clearly under way. However, I do not think that the development of online retailing will drive traditional merchants out of business, as we have seen in Europe and North America. The reason for this is cultural and has to do with what I like to call the “bazaar mentality”. For Turks, traditional shops offer more than online retailers; they can see the products they want to buy, hold them in their hands and interact with the vendor. Besides, many Turkish people are not comfortable sharing their personal bank details online. E-commerce will certainly continue to grow, but perhaps not as much as in other countries.

How have government policies influenced the retail industry and what more remains to be done?

NANE: The sound macroeconomic policies implemented by the current government over the past decade have done much to stabilise the Turkish economy and create new opportunities for businesses. Although one may argue that taxation levels are too high on certain retail goods – in particular electronics – one has to understand the rationale behind this; the government must keep the current account deficit under control. Better macroeconomic conditions are, in fact, essential for the retail industry to keep growing. They boost consumer confidence and prevent economic imbalances that could ultimately compromise consumption and thus, the Turkish economy as a whole.

If retailers are to continue to grow and conquer new markets, there must be stronger emphasis on brand development. The government has announced its intention to create 10 international brands – including two in the retail industry – by 2023. For this, the key will be to invest in research and development, and stimulate innovation via closer partnership between state institutions, research organisations and the private sector.