Consumer Electronics Market in Turkey-Dissertation Writing Help
Executive Summary
Global Crisis and the Turkish Economy
Turkey’s
political and macroeconomic stability has improved under the AKP government,
which was returned for a second term in the elections of 2007 with an increased
share of the vote.
The Turkish
economy has been slowing down, however, because of global economic
difficulties. The overall growth rate in 2008 was affected by the global
economic slow-down, and the consumer electronics market therefore showed a
slight decline in 2008 relative to 2007. Despite the economic fluctuations,
sales of digital TVs are still increasing rapidly while those of all other
digital products are increasing rather slowly. Sales of analogue products
declined by almost 50% relative to the previous year.
Digitisation of Consumer Electronics Products
The digitisation
of consumer electronics products has led to a convergence of technologies
between previously distinct market segments. Digitisation, miniaturisation and
mobility are the key factors influencing the market’s performance.
Digitisation
transformed the sector by delivering a range of new and exciting products that
have changed consumers’ behaviour. Producers and retailers are keeping pace
with the digitisation process in order to meet the needs of the consumer
electronics market.
New-generation Mobile Phones
With more than
65 million subscribers at the end of 2008, mobile phones have become the
fastest-growing sector in consumer electronics within Turkey. New-generation
technologies, the 3G tendering process and number portability all led to growth
in the mobile phones market in 2008.
The
incorporation of radios, mp3 and mp4 players, digital cameras and Internet
connectivity into mobile phones have led to handsets being used as portable
devices including all services in one. The demand for palm and pocket PCs was
effectively destroyed by the launch of smart phones on the market towards the
end of 2008. Low-pixel digital cameras and portable radio players are also
facing competition from the new mobile phones.
Foreign Investments Entered the Turkish Market
Turkey received
a windfall of foreign direct investment during 2005–2008 because of the high
levels of global liquidity and a period of domestic political and economic
stability. The Turkish consumer electronics market continues to be raided by
foreign players, and especially by durable goods retailers. Following the entry
of Darty and Media Markt to the Turkish market, Electro World opened its first
store in Turkey in 2007, while the US-based Best Buy is planning to open a
store by mid-2009 and to expand its Turkish operation in 2010.
All these
durable goods retailers have plans to expand within Turkey, and it is expected
that each of them will be operating 20 outlets by 2011.
Constant Growth Expected in Consumer Electronics Market
Sales of some
products declined significantly during the review period, as digital products
displaced analogue models, and this process is set to continue. Subsectors
displaying strong growth during the forecast period will be laptops, mobile
phones, digital TVs and digital cameras, while sales of analogue products will
continue to fall.
Because of
global economic stagnation, however, growth rates of sales are expected to be
lower than they were during the review period.
Key Trends and Developments
Competition in Distribution Escalates
Both large- and
small-format foreign retailers have shown increasing interest in Turkey. Companies
operating in the retail sector of the Turkish electronics market are competing
both to open more stores and to offer the lowest prices in response to the
foreign companies’ aggressive marketing strategies. Domestic electronics brands
such as Vatan, Teknosa and Gold entered the price war following the entry of
the foreign-based Darty, Media Markt and Electro World.
Darty opened its
first store in Turkey in 2006 and was operating six by the end of 2008. The
company plans to open 14 stores within Turkey and reach 20 stores in coming
years. Following Darty, Media Markt entered the Turkish market in September
2007 and opened seven stores during its first seven months in the Turkish
market. On the other hand Electro World opened its first store at the end of
2007 and was operating five within seven months of its opening in Turkey.
Outlook
Overall GDP
growth is a clear driver of expansion of both retail and consumer sales. The
main factors attracting suppliers into this sector are the potential future
market presented by a large and growing population, Turkey’s large cities, the
local population’s increasing purchasing power and the unsaturated nature of
the consumer electronics market.
There has been
significant foreign direct investment in this sector during 2006–2008, and
there are strong indications that foreign retailers remain interested in
possible investments in the Turkish consumer electronics market.
Current impact
There is a
booming consumer market in Turkey, with growing demand for modern retail
outlets and shopping centres. Modernisation of traditional retailers and the
increasing penetration of modern retailers are excluding some traditional
retailers from the market and reducing the overall size of the sector.
These stores are
providing consumers with a wider choice of brands at lower prices. Consumers
can now view and touch the products before purchasing them.
Sales of
laptops, digital TVs and mobile phones through these retail chains are growing.
Future impact
There will be an
increase in the number of retailers offering consumer electronics products.
Since modern retailers are increasing their market shares at the expense of
traditional retailers, these new players are planning to open more stores in
Turkey’s major cities.
Moreover new
players are planning to enter the Turkish consumer electronics market in
2009–2010. The largest US consumer electronics chain, Best Buy Co., is planning
to open stores in Turkey by 2009, and Circuit City, Radio Shack and CompUSA are
also intending to enter the Turkish market soon.
High-volume
products such as mobile phones, digital cameras, digital TVs and laptops are
likely to see increased sales.
Striking Popularity of Smart Phones
The use of
mobile phones has become integrated into the daily lives of millions of
consumers. Since smart phones entered the Turkish market, they have started to
gain acceptance among consumers, who regard the smart phone as an all-in-one
phone with a camera, radio, mp3 player and Internet connectivity. On the other
hand smart phones have effectively destroyed the demand for PDAs, since they
have Internet, mp3, GPS and Bluetooth capabilities.
Current impact
All brands of
mobile phones had already launched their smart phones before the 3G tender,
following Apple’s launch of the iPhone in the Turkish market at the end of
2008. They sold around 600,000 smart phones in Turkey in 2007, when the
operators offered no support for 3G, and sales of smart phones increased in the
fourth quarter of 2008, once the 3G technology became available to users and
following the implementation of number portability.
The iPhone 3G
has had an enormous impact on the smart phones market. Nokia has maintained its
lead by a considerable margin but RIM, HTC, Samsung and Apple are all now
competing for market share.
Outlook
Mobile phone
operating charges have come down enormously and Skype and other Internet-based
calls are free. Since people can now keep in touch at much lower cost,
consumers now purchase smart phones instead of conventional models in order to
benefit from these features.
The Turkish
Telecom ran a very aggressive marketing campaign in 2008, promoting use of land
lines on account of the high private communications tax charged when people use
their mobile phones. The government plans to reduce this private communications
tax in 2009, however, which will have a positive effect on the market.
Future impact
Sales of smart
phones are likely to grow substantially in the coming years. New product
developments, especially the launches of 3G technology and number portability,
will drive the sales of smart phones and encourage people to replace their
standard mobile phones. It is expected that the 3G technology will be fully
operational in June 2009.
The prices of
smart phones will fall on account of the increased competition between brands.
All operators are expected to run very aggressive promotional campaigns which
will bring more dynamism to this market segment.
Demand for New Technologies
The younger
generation, including even preteens aged 8–12, are able to affect the consumer
electronics market, especially in the mobile phones, mp3 players and computers
sectors, since many households’ purchasing decisions are much influenced by the
opinions of their younger members. Because of the younger population’s interest
in new technologies, they are replacing their desktops, Walkmans and Discmans,
etc. with digital products such as laptops, mp3 players and HDTVs. Large
multinational companies such as Sony, Panasonic, LG and Samsung continue to dominate
the markets in digital products.
Many products
remain inaccessible to some parts of the population because of their high
prices, but durable goods retailers are developing new marketing strategies
based on reducing unit prices to make these products more affordable to more
consumers.
Current impact
Technological
advances and innovative products are some of the leading factors in the success
of the major consumer electronics players. As digital technology takes over,
older technologies, including CRT televisions and analogue cameras, are
becoming outdated. Growing consumer demand for digital products increased the
overall sales of consumer electronics products, despite the countervailing
decline in sales of analogue products.
This trend has
had a major effect in portable consumer electronics, and especially in the
mobile phones, laptops and media players subsectors, but HDTVs and DVD players
(including those with blu-ray technology) within in-home consumer electronics
are also affected. Because of the transition to digital technologies, domestic
manufacturers are now focusing on switching their product portfolios from
analogue to digital.
Outlook
The rapid pace
of change in consumer trends, together with invasion of low-priced minor brands
from Asia, has forced the market’s leading players to increase their investment
in new product development. The growth in demand for digital products was
strong in the review period and this is expected to continue in the forecast
period. High demand and a large number of distributors and manufacturers in the
consumer electronics market are forcing a decline in their unit prices.
Companies
understand the importance of producing low-cost products in order to gain a
larger consumer base. Digital products are expected to become increasingly
popular on account of their lower costs and the younger population’s interest
in replacing older products with the newer ones that are appearing on the
market.
Future impact
The emergence of
new products and the growing effects of innovation are increasingly attracting
early adopters of new technologies to the market. Consumers are paying more
attention to the products’ latest and most sophisticated features and to the
slimmer and more compact styles offered by recent technologies. Since new
technologies find an increasing demand and are being introduced quickly to the
market, it is to be expected that consumers will spend more on digital products
because of their continued desire to replace older or analogue products.
The digital consumer
electronics market is far from saturated in Turkey, so it will expand with the
growing popularity of these products.
Second Tier of Consumer Electronics Retailers
As technology is
rapidly developing, the market in consumer electronics products is growing on a
daily basis in every city in Turkey. Apart from the major players like Darty,
Teknosa and Media Markt, there are domestic retailers in cities where these
major durable goods retailers have no outlets. The suburbs of big cities and
other cities in Anatolia contain many potential consumers of these products,
and this second tier of consumer electronics retailers is focusing on this
customer group.
Current impact
The growth of
domestic second-tier players is rather notable. These durable goods retailers
differ from the major chains in that they provide consumers with lower-priced
products and focus on regions in which the bigger players do not intend to
invest, such as cities on the Black Sea coast or in central Anatolia.
These players
are nevertheless offering flexibility in payment terms, promotional devices,
discount prices and good after-sales service.
There are about
500 small durable goods retailers in Turkey’s different regions, apart from the
well-known retailers such as Mavi Bilgisayar, Teleses, Teknolojix and
TeknoMobil. Some of them operate under a franchise system.
Outlook
The products
that sold most strongly are laptops and mobile phones, followed by digital
cameras, HDTVs and portable media players.
The revenue of
smaller durable goods retailers reached almost US$1 billion in 2008 and the
widespread adoption of products was quite striking. This trend is expected to
continue and remain strong on account of the unsaturated market conditions in
smaller cities and suburbs. In addition, all these new durable goods retailers
plan to invest further in opening more stores in various cities within the
country in order to reach more consumers and benefit from these market
conditions.
Future impact
These durable
goods retailers are planning to expand their operations, by opening more stores
in more cities in the medium and long term.
The adoption of
more electronics products by this new target group of consumers will affect
their overall penetration rates and replacement cycles, since the current
penetration rates in these areas are very low. As more consumers encounter such
technology, more people will benefit from using the new products.
Unit Prices Decrease
The rising
affluence and lifestyle changes of urban families in Turkey have led to the
emergence of a new class of consumers with greater spending power. The rise in
consumer spending power is driving the growth of sales in the consumer
electronics market.
Some segments of
consumer electronics products are very dependent on imports into Turkey which
may be affected by the exchange rate. The YTL was strengthening against the
dollar over the review period, so the unit prices faced by Turkish consumers
were falling.
Current impact
Turkey’s
purchasing power has been increasing in dollar terms, which enabled consumers
to buy and spend more in 2008 than in previous years until the emergence of the
current economic crisis. Even during the crisis, however, many durable goods
retailers fixed the foreign exchange rate at a particular level in order to
offset the potential decline in their sales. Demographic trends, urbanisation
and busier lifestyles are all increasing consumers’ demand for mobile tools.
While the industry has responded by providing new and innovative products, the
consumer electronics market has been marked by the emergence of intense
competition.
The retail
prices of laptops, HDTVs, digital cameras and portable media players have all
seen significant declines in their prices as a result of the fall in the
dollar.
Outlook
The dollar
regained its 2001 level in October 2008 but the continued uncertainty is
affecting the market. Following the modernisation and restructuring of the
Turkish economy during this period following the previous serious crisis in
2001, however, Turkey was in a good position to face the global economic crisis
of 2008.
People can see a
wider variety of branded products, including those of minor brands that carry
lower price tags. The growing demand is encouraging the entry of new players,
new brands and new retailers into the market and thus leading to an
intensification of competition. As the competition becomes more severe, prices
tend to stay at the minimum level.
The trend is
expected to develop under conditions of uncertainty. While the YTL is strengthening
against foreign currencies, there is no guarantee that this will continue. If
there is any increase in the cost of foreign currency, domestic prices will
tend to rise in the medium term. (In the short term, retailers who have stocks
of products bought at the lower rate will keep the prices lower in order to
remain competitive.) In case of such an increase, there is no telling how long
the cost of foreign exchange will remain high.
It is logical to
estimate that retailers will be the most vulnerable actors in the market in the
case of short-term exchange rate fluctuations, since they will try to keep
their prices lower in order to maintain levels of demand.
Future impact
After the onset
of the economic crisis in 2008, sales in the consumer electronics market fell
slightly but unit prices remained the same on account of retailers’ policy of
fixing prices against the dollar. The pricing policies of both manufacturers
and distributors are expected to lead to an expansion of the consumer market,
bringing in new buyers as prices fall and creating a larger consumer base for
services and upgrades in the future.
As prices
continue to fall for digital devices, they will become increasingly affordable
in emerging market segments, which will give an important boost to sales of
consumer electronics products.
