Turkish retailers sacrifice profits to shield market share hit by crisis

Rapid growth in the Turkish economy since a 2001 financial crisis has fuelled aggressive retail expansion and modern shopping centers continue to rise up across the 70-million strong country at a dizzying pace.Â

 

That growth is now evaporating in the face of the global financial crisis, shrinking export markets and falling consumer confidence. Retailers are being forced into drastic price cuts to defend the sector's outlook.

 

"The basic goal now is not to lose market share and customers. We can say that we are sacrificing profitability," Ekrem Akyigit, chairman of Turkey's United Brands Association (BMD), told a news conference.

 

Retailers have seen their markets shrinking some 5-15 percent this year as a result of consumer caution, he said.

 

The BMD, whose members have annual turnover of some $17.5 billion, had previously forecast the non-food retail sector would grow to $80 billion this year from $70 billion in 2007. It targets an ambitious 15 percent growth next year.

 

To prevent further market erosion, the 350 brands within the group were offering up to 50 percent discounts, pushing closer cooperation and pressuring shopping centers to lower rents.

 

In a sign of sector discontent, shopping centre retailers in the Black Sea city of Trabzon and in the capital Ankara have staged protests this week against high rents, closing their shops for up to two days, leading Hurriyet newspaper reported.

 

Retailers at the BMD meeting called for the introduction of turnover rent, calculated by reference to the turnover generated at a shop, in a move to ease shopkeepers concerns and prevent job losses in the sector.

 

"The most important thing here is to maintain employment for the 160,000 people (who work for BMD companies)," Asli Karadeniz, general manager of leading Turkish retailer Boyner (BOYNR.IS: Quote, Profile, Research, Stock Buzz), told the meeting.

 

The shopping centre sector is expected to double in size in the next five years from around 190 currently, raising concerns that the market will be flooded just as the economy loses pace.

 

Retailers are also faced with higher import costs as a result of a weakening of the lira currency, which has lost around a quarter of its value against the dollar this year.

 

Akyigit, whose fashion retail company Collezione has some 220 stores, said local retailers were beginning to consider renewing domestic production as the weaker lira made Asian imports less attractive.