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Turkey, Boom Interrupted?

As Turkish police fire water cannons at protestors in Istanbul, is the country’s risk-to-reward ratio shifting? BoF investigates.
Source: Illustration by BoF
  • Robb Young

ISTANBUL, Turkey — It's about a 15 minute stroll from the Emporio Armani boutique to Taksim Gezi Park, where the initial sparks of the on-going Turkish protest movement were inflamed by heavy-handed police and an unyielding central government. Typically, on your way through this section of Istanbul, you pass starry-eyed lovers, wheezing joggers and diamond-encrusted ladies walking miniature dogs through the wide open lawns of Maçka before descending into the scrum of street hawkers and gridlocked traffic that chokes Taksim Square. The route, though meandering, is shorter than the length of London's Oxford Street. In other words, in Turkey, fashion and politics are even closer now than before.

The Emporio Armani store here is just one of several dozen blue-chip fashion flagships in Nişantaşı, Istanbul's downtown epicentre of luxury retail. And while Nişantaşı is by no means a nexus for the still unfolding civil unrest, that has now spread to many of Turkey's major cities, the quarter has been sporadically affected over the past two weeks. Local residents have joined in some of the more festive street rallies that have popped up there, chanting to the beats of kitchenware drums and honking car horns, or caught up in the melee when barricades were erected in response to less friendly protests encroaching on the neighbourhood.

Yet when this writer called the Emporio Armani store, today, posing as a reluctant foreign tourist wondering if there were any disruptions to business, the shop assistant was adamant: "No, no, no. No problems." All week long? "No, nothing changes." So is it safe? "Of course." A series of spot-check telephone calls to a few other big-name fashion brands in Nişantaşı garnered similar responses. The message from fashion's frontline faces — its shop staff — seemed fairly united around one theme: business as usual.

"Well, there has been an insane amount of tear-gas grenades and pepper spray used [in some areas of the city]," Ece Sükan, former editor-at-large for Turkish Vogue and a prominent international fashion correspondent who has joined the 'OccupyGezi' resistance movement, told BoF. When reached on Sunday, Sükan was unable to immediately elaborate. "Right now I have my gas mask on and am exactly in the middle of the protests," she replied by email from her mobile phone. But according to most media reports and an open-source Google Map being updated by protestors and concerned netizens showing demonstration hotspots, most of the action does appear to be outside of Nişantaşı and the major fashion districts.

When compared to the early days of other recent upheavals around the world, Istanbul's fashion centres have, so far, fared well. For comparison, one need only cast a glance across the Aegean to neighbouring Greece, where, a few years earlier, violent protestors invaded and vandalised fashion boutiques in Kolonaki, a district of Athens that’s much like Nişantaşı. Admittedly, the circumstances in Greece were quite different. In Athens, protestors directly targeted luxury neighbourhoods. But the anger brewing in Istanbul could still spill over into fashion centres like Nişantaşı.

And indeed, the current reality in the area is almost certainly less rosy than luxury store staff would have us believe. On Monday, Bloomberg interviewed one Istanbul analyst at IS Investment who said that "retailers have generally been hard hit by protests [and that] shopping mall occupancy rates are expected to decline." Of course these are predictable short-term consequences that may bounce back. But even if the fashion boutiques in Istanbul, Ankara, Antalya and Izmir are still bustling and the tills keep ringing in the days and weeks to come, will it ever really be 'business as usual' for Turkey, which, until last month, was touted as a red-hot emerging fashion market?

"Everything is upside down right now," said Sükan when reached again yesterday for a follow-up conversation. "We need to observe and see what will happen. For example, some of the big business groups in Turkey — which includes TV channels, banks, restaurants, [media groups owning] fashion magazines and many more industries — are being boycotted by [one of] their major consumer groups. So the trust and power is changing hands and the youth are discovering that they can unite when they want to express themselves to look for new visions. This could open up new paths and maybe even new fashion needs if the economy eventually goes well [again]."

Over the past decade, international luxury houses and high-street brands alike have flocked to Istanbul in droves — not only to historic Nişantaşı but to newer purpose-built retail hubs around the sprawling city, like Istinye Park, Kanyon Mall and Zorlu Centre. Through a handful of powerful Turkish partners such as Beymen and Vakko's V2K department stores, not to mention joint-venture operators like Demsa, Unitim, Dogus Holding and Eren Holding, international fashion brands are now as present in Istanbul via department store concessions and monobrand boutiques as they are in most European capitals.

According to CPP Luxury's Oliver Petcu, an analyst specialising in the region, "Prada, Hermes... Gucci, Burberry, Christian Louboutin, Tod's, Ralph Lauren and 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." Louis Vuitton currently has three Istanbul locations. And as if to drive the point home, earlier this year, 25 chief executives from France's most well-known luxury brands flew en masse into Istanbul under the umbrella of the Comité Colbert trade association, which represents nearly 80 French luxury firms, to strengthen ties with local players and woo consumers with a large-scale cultural shopping event.

The market's rising importance — even beyond the growing numbers of big-spending locals — was summed up by Élisabeth Ponsolle des Portes, president of Comité Colbert. "Turkey is taking on a more and more important regional role," she said at a press conference. "The country, and especially the city of Istanbul, is becoming a regional trendsetter. For the last two to three years it has attracted a clientele from the Gulf countries, who previously flocked to Beirut, as well as from the ex-Soviet republics." According to Hürriyet, a Turkish newspaper reporting on the delegation, French luxury firms present in Turkey have seen their turnover grow by an average of 30 percent per year over the last five years.

At the other end of the price spectrum, fast fashion companies appear extremely bullish in about the Turkish market. Topshop has six branches in Istanbul alone while H&M and Zara are in a half-dozen or so more cities around the country, sometimes in three or more shopping malls in just one city. Mango has penetrated even further.

What’s more, a few of Turkey's more successful home-grown brands like LC Waikiki, Mavi, Koton, Collezioni and Kigili have all begun to expand internationally around Europe, the CIS or the Middle East, thanks primarily to the legacy of Turkey's dynamic, adaptable textile and apparel manufacturing industries.

Market experts estimate that Istanbul currently accounts for 60 to 80 percent of Turkey's consumption of international fashion brands. But that number is shifting with the rise of the middle class in the country’s provinces and the emergence of a newly wealthy, entrepreneurial elite dotted across the country. Glamorous multibrand formats like the select shop Brandroom have already established branches outside Istanbul, in Ankara, Adana and Antalya. Harvey Nichols' second Turkish outpost bowed in Ankara in 2010, while Galeries Lafayettes has signed an agreement to open in Istanbul by 2015. According to inside sources, representatives of Saks Fifth Avenue, La Rinascente and El Corte Ingles have all held exploratory meetings with Turkish franchisers.

So how does this recent trajectory of rapid growth square with a possible future of economic uncertainty if social and political unrest continues?

"Anti-government protests in Turkey may at first seem like the land of Turks is in turmoil, however the bigger picture suggests a much brighter case," says Demet Mutlu, founder of, a venture-backed e-commerce company selling a virtual A-Z of popular and niche international brands, as well as Turkish brands and a private label to over 1.5 million unique buyers, which counts Kleiner Perkins Caufield & Byers amongst its investors.

"The recent protests... may have confused the global community in the short term but the strong fundamentals of the economy and the changing socio-dynamics account for the fact that every opportunity comes with certain challenges." Whatever those challenges may be, she suggests, they can be "addressed by international brands once they enter the market."

Indeed, market scale and demographics continue to make Turkey an extremely attractive destination for international fashion brands. More people live in Turkey than in South Korea and Taiwan combined. And about 30 million of these 75 million Turks are between the ages of 20 and 44. What’s more, according to Euromonitor data, affluent Turkish households (those with annual disposable incomes of over $75,000) nearly doubled over the past six years to 1,311,600 from 737,500, on par with countries like the Netherlands.'s Mutlu is a walking fountain of market data. She cites the meteoric rise of credit card usage and data recently announced by the Turkish Patent Institute showing that the number of foreign trademark applications more than trebled in just one year from 2011 to 2012. What's more, she explains, "Turkey still remains a low density market in terms of Gross Leasable Area per inhabitant." From 2005 to 2012, the number of shopping malls more than trebled, she says, but by the end of this year, there will be nearly 50 more of them, totalling 342 malls. With its 36 million internet users (47 percent penetration) and approximately 10 million online shoppers, the expected growth of online retail in Turkey also makes it one of the world’s most attractive e-commerce markets. "So what does this mean for international luxury brands?" she asks. "A single word is sufficient: opportunity."

But not everyone is quite as sanguine.

A vocal minority of international observers including economists, investment bankers and financial correspondents such as Landon Thomas Jr. from The New York Times, say that Turkey's growth is unsustainable. Even without the recent protests (which have depressed the Turkish stock market), they contend that Turkey's boom is built on "a mountain of debt" to international creditors, who could leave the country as quickly as they arrived. "This is a classic credit boom, with money being thrown at Turkey, especially the banks," Tim Lee, an independent economist at Pi Economics in the US, told The New York Times. "At some point, though, you reach a moment when the music stops."

The majority opinion remains optimistic. Most macroeconomists haven't changed their forecasts for the country and appear to have confidence in the government's ability to manage the economy and recent social unrest. But in the face of continuing protests, investors could become jittery, causing lasting damage to Turkey’s progress.

"It is still too early to say," says Sükan, who is, today, once again out on the streets of Istanbul. "Actually, it is also interesting to remember that this protest started to protect Gezi Park from being demolished and turned into a shopping mall. Twenty days ago, there was a lifestyle around shopping malls, but now some people are boycotting them. The protest started with a park, but all of a sudden it became about the bigger issue of [government] suppression. So, it really depends. We'll see."

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