An in-depth look at the real potential of Turkey’s luxury market (part 1 – fashion)
Despite a slower economic growth in 2012, mostly due to the debt crisis in Europe, an aging population (the average age has risen in 2012) and a significant growth in unemployment, Turkey remains one of the most robust economies in Europe with one of the fastest growing luxury markets in the world which has long time made the transition from emerging to mature.
Tourism is one of the main pillars of Turkey’s economy, attracting mostly budget travellers with all-inclusive packages at hotels which are mostly classified as five star. The booming development of Turkish Airlines, which serves 200 destinations worldwide, has also contributed to the growth of the Turkish tourism sector in the past years. Much like the country’s brand which is perceived as an affordable leisure destination, Turkish Airlines’ boom has been generated by the growing transit traffic motivated by competitive prices. Similarly to Qatar Aiways which has long been advertising its five star rating, Turkish Airlines is heavily promoting its business class, however, with the same intent, of creating an aspirational positioning.
To understand Turkey’s luxury market, one should understand its positioning as a destination. Istanbul concentrates 80% of Turkey’s luxury market for all sectors – fashion, accessories, jewellery, watches, hotels, cars and real estate. Istanbul’s growth is mainly due to the growing upper middle class of Turkish nationals as well as the increasing number of corporate and leisure individual travellers, especially from Middle East, CIS and Central Asia. But Turkey is still regarded as a mass market destination. Should its positioning improve, its luxury market could double.
As for Turkey’s largest city and financial hub, Istanbul has been improving its already premium positioning, with several new international luxury hotel operators opening this year. The arrival of Shangri-La this summer and the Raffles towards the end of this year will consolidate the image of Istanbul as a true luxury destination, adding to the two Four Seasons hotels (London and Istanbul are the only cities in the world with 2 Four Seasons properties), Ritz Carlton, Park Hyatt and Jumeirah, which are odly competing with the likes of Best Western and Holiday Inn, which in Istanbul are rated as five star hotels too.
According to CPP‘s research, the country’s super rich account for less than 1% of the population and with the exception of cars, they make all their purchases of luxury goods abroad. The Turkish upper middle class is the real growth generator for Turkey’s luxury market – locals earning over 100.000 euros per year, most of them entrepreneurs and employees in top management positions at major local and international corporations. The upper middle consumer segment accounts for 50% of sales accross all luxury sectors in Turkey, their main motivation to buy locally is a way to differentiate themselves socially (show off). It is interesting how this need to show off compensates the biggest challenge of Turkey’s luxury retail which is represented by the pricing of luxury branded goods, on average, 20% higher than those in Milan or Paris.
CPP‘s research has also found that the majority of Turkish luxury consumers (both men and women) are drawn to shop for a certain luxury branded product which they have seen in tabloid print media (worn by a local VIP/celebrity) and not by traditional advertising in fashion glossy magazines. Tabloid print media (over 20 national daily papers) and tabloid style TV shows (all national TV stations have at least one daly tabloid show) are very popular in Turkey, attracting huge audiences.
Istanbul’s luxury market has also benefited, indirecly, from the Arab Spring, attracting many of the rich from Tunisia, Egypt and Syria. The political ties with the Arab world and being a muslim country have greatly contributed to the influx of these rich consumers. According to CPP’s research, these rich foreigners from the ”Arab Spring” countries account for up to 10% of the luxury sales in Istanbul.
As a luxury shopping destination, Istanbul offers traditional street level shopping (the Nisantasi district of Istanbul) as well as shopping malls (Istinye Park Mall, Kanyon Mall and the upcoming Zorlu Centre). Major international luxury brands such as Prada, Hermes, Vuitton, Gucci, Burberry, Christian Louboutin, Tod’s, Ralph Lauren, Armani, each operate two mono-brand stores in Istanbul, while Ermenegildo Zegna, Chanel and Michael Kors will have three stores by the end of this year. With the opening of Zorlu Centre downtown Istanbul (a luxury mixed-use complex which includes the future Raffles Hotel Istanbul) several international luxury brands are likely to open more locations in Istanbul towards the end of this year.
Beymen is the largest local operator of luxury department stores in Istanbul, under its own brand, with flagship locations both at Istinye Park Mall and the Nisantasi district and operating in franchising or through joint ventures several international luxury brands.
Oliver Petcu in Istanbul
In an exclusive interview to CPP-LUXURY.COM, the General Manager of BEYMEN, Mr Elif Capci has shared his views on the future of Turkey’s luxury market.
Can we speak nowadays of Turkey as a an emerging or a mature luxury market?
Turkey is rapidly becoming a mature luxury market, with fast growing number of luxury brands. Growing number of local clientele, coupled with the rapidly increasing tourist inflow are changing the face of the Turkish luxury market.
Which do you think are the challenges the Turkish luxury market is still facing and which are the missed opportunities?
Today there are more opportunities in the Turkish luxury market than challenges. As Turkish economy grows, luxury consumption becomes more wide spread across the Turkish consumers. This feeds the growth. As a result, the robust Turkish economy makes Turkey increasing attractive for luxury brands, which find growth alternatives elsewhere around the world to be very limited limited.
In terms of challenges, retail space is still at the top of the list. Except the shopping malls, existing real estate opportunities on high street are retail conversions from residential and lack the global luxury standards.
How has your company’s strategy changes since more luxury brands operate directly in Turkey?
Beymen is the pioneering leader of Turkish luxury fashion retail and has partnerships with more than 400 brands. Beymen’s rich heritage and strong brand equity make Beymen the preferred partner for the brands which participate in the Turkish luxury market, either through Beymen stores or monobrand boutiques run by Beymen. In the recent years, Beymen has also undertaken joint venture, with brands like Christian Dior and Christian Louboutin to run joint boutique operations.
You have successfully implemented a department store concept under your own brand in Istanbul. Tell us more about your philosophy, brand mix etc
Beymen specialty stores are located at the most prestigious locations throughout Istanbul and Turkey’s other leading cities. Although the average store size is around 4000 sqm, we are increasingly opening larger stores. The next store opening in Istanbul in August 2013 will be around 10.000 sqm. Beymen represents almost all leading luxury brands, most of which are exclusive to Beymen in Turkey. In addition to all this, the success of the Beymen formula is composed of best in class choice editing, impeccable customer service (as described by our “unconditional customer happiness” mission) and beautiful stores, where we always emphasize the drama factor and a perfect luxury experience.
How many franchises do you operate today and how many mono-brand stores? Do you have plans to introduce new brands to Turkey in the future?
Today Beymen operates a total of 65 stores of different formats. 18 of these stores are franchisees. Beymen also currently operates 10 monobrand boutiques and plans to open new boutiques in 2013. The new openings will include Brunello Cucinelli, Valentino, YSL, Pucci, Stella MacCartney, Tory Burch, Dolce Gabbana. There will also be three new tunnel shops featuring Celine , Bottega Veneta, Chloe
As a local player with long time experience and understanding of the market, what is your advice for luxury brands, especially fashion and accessories, who seek to enter the market with direct operations?
For new market entry the most important thing is always location, location, location. Obviously it is equally important to set up the right team who well understands the local market while representing the brand in the right manner.
What percentage of your customers, across all brands and concepts, are foreigners and which are the top 3 nationalities? Has this dynamic changes in the past 3 years with the Arab Spring – Tunisia, Egypt and Syria?
Sales from foreigners grew by 40% in 2012, making more than 10% of total sales. This ratio reaches 20% in some Istanbul locations and exceeds more than 30% in the monobrand boutiques. This trend definitely gained further pace after the Arab Spring. Customers from Azerbaijan, Russia and the Gulf Region are among the top three.
How would you describe the most loyal local Beymen consumer? (Turkish, not necessarily from Istanbul)
Beymen has a very loyal customer base, thanks to our best in class choice editing, superior customer service and loyalty program. The combination of these make Beymen a superior shopping experience that our local customers prefer over shopping elsewhere either in Turkey or abroad.
How has your e-commerce business evolved?
Beymen started its e-commerce operation in November 2010 and since then the business is growing exponentially. Today, close to 3% of total sales come from internet and the objective is to reach 5% in the near future.