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Country Spotlight: Understanding Consumers and Cross-Border E-Commerce in Turkey

Turkey has always been a beacon of commerce. Today, Turkey’s B2C e-commerce market is the second largest in Eastern Europe, the internet penetration rate is the 7th highest in the world and total e-commerce revenues, already over $5 billion USD in 2016, are growing at a rate of 13.7% per year.

One of Turkey’s success stories is that Demet Mutlu, the founder of Trendyol, an online fashion retailer which since its inception in 2010 has become one of the country’s leading e-commerce operations, accounting for 2% of Turkey’s total e-commerce revenues in 2015. And this potential has not been lost on foreign investors either – China has taken a shine to Turkey, signing a deal on e-commerce bi-lateral trade at the G20 summit in Turkey last November, at a time when many cross-border players have been keeping their distance amidst domestic turmoil.

Turkey holds a lot of promise for international retailers. With Europe’s youngest median age and an increasingly technologically literate population, the e-commerce sector is expected to grow by 107 percent and smartphone penetration by 124.4 percent in 2017. For those of you thinking about taking part in this growth, we’re going to take a closer look at e-commerce in Turkey and how you can benefit from it.

Unless otherwise noted, figures in this article are sourced from:

Turkish Consumers

  • Internet users: 37 million
  • Online shoppers: 10 million
  • E-commerce sales: TRY 35 billion (EUR 12.5 billion)
  • Mobile shoppers: 4 million
  • M-commerce sales: TRY 2.1 billion (EUR 750 million)
  • E-commerce annual growth rate: 13.7%

Turkey has one of the fastest growing e-commerce sectors in the world, thanks to four driving factors: high credit card penetration, the popularity of social networks (Turkey has the fourth-largest Facebook population in the world), the maturity of the country’s physical infrastructure and, most importantly, the high level of mobile payment penetration. In Turkey’s payment landscape, mobile is seen as a major channel for online retail and customer interaction and Turkey is the leading European country in terms of mobile banking adoption, with 49% of internet users banking on their phones.

Turkey’s e-commerce market is still dominated by items whose quality and content are easy to assess, such as books and media products, indicating a relatively low level of consumer confidence. On the other hand, nearly one in every four Turkish people above the age of 14 have participated in e-commerce, almost half of them purchasing clothes and sporting goods. Other leading product categories include consumer electronics and home furnishings.

Along with local fashion giant Trendyol, another of the country’s leading e-commerce operations is Markafoni, which represents the Turkish trend towards private shopping. Investors, both local and foreign, have taken a strong interest in this new local shopping habit, where consumers purchase a membership for an e-commerce site which gives them exclusive access to that store.

One attractive feature of Turkey for cross-border retailers is the high popularity and penetration of credit cards. Accounting for 90% of all e-commerce transactions, credit cards are overwhelmingly the most popular method of online payment, with the small remainder shared by cash-on-delivery, e-wallets and bank transfers.

Drivers and Barriers

Driver: Mature Delivery Infrastructure

Another attractive quality of Turkey’s e-commerce market is the country’s highly mature fulfillment infrastructure. Nearly the entire population has access to door-to-door delivery, which makes it easy for international merchants to make sure their products are received in a timely manner.

Barrier: Domestic Instability

Political unrest in Turkey has caused consumer confidence to plummet, though it has been rising since hitting a six and a half year low last September. Sudden changes to the socio-political climate in Turkey and neighboring states could have unexpected effects on the e-commerce landscape.

Driver: Demand for Niche Products

Many large and small firms closed down in 2015, unable to secure cash-flow, leaving Turkey’s e-commerce market de-saturated. As consumer confidence recovers, so does the demand for niche, long tail products. Early stage start-ups meeting local demands such as online furniture seller Vivense and real-estate marketplace Tapu have seen success by focusing on specific needs.

Barrier: Large Incumbents

The flip side of this de-saturation is that the large private marketplaces such as Markafoni and Hepsiburada have cornered more of the market, leaving little room for more large-scale retailers. The fat head (large incumbents) and the long tail (artisanal shops) will thrive, but there’s little room for anything in between.

Turkish E-Commerce Facts

  • The second-fastest growing e-commerce market in Eastern Europe (13.7% CAGR).
  • The world’s 7th-largest internet penetration rate with Europe’s youngest median age.
  • A very mature physical delivery infrastructure and a low returns rate for cross-border purchases.
  • Credit cards are the preferred method of online payment, account for 90% of the total.
  • The most popular product categories by volume are clothes, sporting goods, electronics, household items and travel arrangements, but there is also a high demand for long tail artisanal products.
  • A special license is required to import mobile phones into Turkey; certain cosmetic products, including perfumes, powders, and toiletries, are on the Turkish no-import list.

Turkey is a powerful commercial hub with one foot in Europe and the other in Asia. Particularly compared to its nearest neighbors in South-Eastern Europe and the Middle East, Turkey has a very attractive foundation for cross-border e-commerce retailers, high internet and mobile penetration, widespread acceptance of credit cards and a mature physical infrastructure. Both for the sheer size and growth potential of the market and for the strategic advantage of establishing operations there, Turkey has earned its reputation as a wise investment and one of the most promising emerging e-commerce markets in the world.

Expanding into a new international market is a risky venture but a very rewarding one if done right. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the Payza Blog and follow us on Facebook and Twitter for the latest industry news.