Turkey is luxury’s next landing place

A market not easy for brands to approach, but one that promises interesting margins for development. In these last months of 2022, Turkey is emerging as a new high-potential destination for luxury. A country that industry experts have called «surprising» with the latest Bain-Altagamma study highlighting how, having not imposed sanctions, the country is taking advantage of Russian consumption and emerging as a major new market for high-end brands. «It is a market that in 2021 was worth a little over 1 billion euros and that we now estimate will grow by about 25% in 2022, partly due to the tourism boost», Stefano Fenili, partner at Bain & company, explained to MFF.

«Turkey is also a country where there is a lot of domestic inflation, thus if we were to analyze the market in Turkish lira, we would see that, actually, the high-end has almost doubled its value in local currency over the year, increasing by about 100%. Overall, this is a very promising region, and we estimate that the Turkish one is a dynamic market for luxury with various likely future scenarios, but one that we project to grow in the near future as well». This optimism is partly dictated by the increase in arrivals of high-spending tourists from Russia and other countries, but also by the awakening of the local customers. The country, whose gdp is expected to exceed 900 billion by 2024, has indeed benefited from the increase in domestic consumption, with Turks themselves beginning to invest more in luxury goods both because the supply has expanded and partly because, with rising inflation, they have preferred to buy now to prevent possible list adjustments by brands.

«As was the case in the rest of Europe, restrictions on foreign travel helped local consumption here too. And compared to experiences, spending has focused on personal products», the expert specified, pointing out that the plus for Turkey is that it was still underdeveloped as a luxury penetration in the local market. «We are seeing a huge trend of market premiumization in a sense, in part due to the expansion of the product offerings of luxury brands in the Turkish territory, also and especially through new store openings, and a new tendency on the part of more affluent Turkish consumers to approach these products». This unfamiliarity of local customers with high-end brands is explained by the fact that in the luxury sector there are some categories that are still under-penetrated compared to other parts of the world, such as leather goods, for example, which still have room for growth, but also high-end beauty. «This is partly explained by the lack of specialty stores, but also because, traditionally, there is less education about buying perfumes or cosmetics from luxury brands. The same thing happens with jewelry, which is rich but still unbranded. The branding of jewelry is another trend that is expected to take hold soon».

As mentioned, however, the increasing tourist influx has also been further boosting luxury consumption, with many arrivals of affluent travelers from the Middle East. The Russians registered the highest surge, attracted by one of the few countries with open borders. «They certainly catalyzed in Turkey part of the purchases that were traditionally made in other european nations and visibly affected the luxury consumption of these countries on the old continent. However, the most interesting facts that suggests to us that Russia will remain significant under a consumption point of view in the near future is the fact that some russians have taken advantage of this series of facilities to move their mega yachts there, but more importantly that many have purchased real estate that allows them to apply for citizenship permits», Fenili pointed out. «Whether this reaction is just a momentary effect that will vanish when geopolitical tensions normalize, we cannot say. The fact remains that for now, russians are continuing to spend in this market, and the fact that so many have even taken Turkish citizenship makes us think that we are not simply facing a phenomenon that will remain confined to 2022, but that some russians will decided to spend a good part of their lives here and that these level of consumption will therefore remain constant also in the upcoming years».

However, if on one hand the country offers a promising consumer landscape for fashion & luxury companies, on the other there is no shortage of logistical difficulties for brands. In fact, opening a store or operating a local branch in this market is not so easy today, as the Bain & company’s expert explained, which is why in many cases finding the right local partner (Beymen being one of the best so far, ed.) can be a way to take the first steps. «First of all, Turkey is a difficult country operationally as well as in terms of customs management. And then there are several limitations at the real estate level, because Istanbul still accounts for the bulk of the market but with few locations and luxury shopping centers or districts, then there are some other areas with a high concentration of resorts, such as Bodrum or Antalya, where there is some concentration of luxury shopping, but it is still a minimal share compared to Istanbul», Fenili continued. «The problem is that, in the metropolis, spaces are quite full and if a company wants to open a store, it is not necessarily going to find the right space, also because luxury brands are not willing to go below certain standards. Moreover, there is no real luxury street on the model of Via Montenapoleone, Milan, so any expansion process in the country might be slower than in other parts of the world». Therefore, the main retail model is open-air malls within the city’s various districts. Open for more than a decade, the main ones are Istinye Park and Zorlu, while the most recent opening is Galataport. There are currently no further developments in the pipeline for the immediate future.

For this reason, although the main brands have about two or three boutiques, Turkey is still for all intents and purposes an emerging or unexplored markets for many fashion brands. «We are positive because it is a country that, from the finished product point of view, we think will continue to grow fueled by this dual local and tourist soul. The same goes for the manufacturing aspect», the expert concluded. «There are several realities in the manufacturing sector, especially in textiles, but not only, that in addition to producing for premium brands are also starting to do so for luxury brands. This is also driven by the fact that Turkey is a country where the cost of production is higher than in East Asia, but still more competitive than Made in Italy. The proximity to Europe, in addition, is a benefit for nearshoring, because it shortens transportation time and facilitates communications». Finally, in recent years, local creativity itself has carved out an increasingly prominent space in the international scene by hosting trade fairs dedicated to textiles and prints, such as the Istanbul fashion connection (Ifco), as well as events such as the Istanbul fashion week, true showcases for the country’s emerging designers. (All rights reserved)