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Retail Trends

Can Migros Ticaret Challenge for Tops in Turkey?

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Turkish retailer Migros Ticaret announced growth of 11.5 percent on sales revenue of $3.4 billion in 2011. Gross profit ($890 million) grew 12.8 percent last year, and results for the first quarter of 2012 show 14.5 percent revenue growth. Migros Ticaret is the second-largest retailer in Turkey, behind hard discounter BIM and ahead of local discounter A101. Migros Ticaret’s sales growth appears impressive, but its main rivals outpaced it by growing nearly 24 percent and 71 percent, respectively, last year. Sales growth for both companies is projected to slow this year, but should still be higher than for Migros Ticaret. Already boasting much larger store networks, BIM and A101 added more locations to their network last year, and 2012 outlet growth is also predicted to be higher for the two discounters. BIM and A101 have consistently turned in impressive results because the Turkish hard discount market continues to have powerful growth potential, thanks to the low level of organized retail and the increasing penetration of private label products. In 2011, private label had a 64.1 percent share of total at BIM and more than 50 percent for A101, with Migros Ticaret lagging well behind. Although its main rivals are expanding faster, they remain restricted to discount formats as a potential source for revenue growth, whereas Migros Ticaret operates supermarkets, hypermarkets and wholesale operations. BIM and A101 do not operate e-commerce channels, whereas Migros Ticaret has seen its online grocery banner develop steadily over the past couple of years. In 2010, the retailer introduced its own mobile shopping application, which accounted for 10 percent of the company’s total retail trade transactions in 2011. At the same time, Migros Ticaret expanded its click-and-collect operations to cover 67 stores in 17 cities.

International growth Migros Ticaret also operates internationally, with supermarket and hypermarket formats in Kazakhstan, Kyrgyzstan and Macedonia. A solid economic environment and promising retail scene in countries like Kazakhstan could afford Migros Ticaret good scope for growth abroad. Further expansion into Eastern European markets is planned, although nothing has yet been announced. BIM has been more successful internationally, with more than 100 stores in operation compared with Migros Ticaret’s total of 30 in three countries. In July, BIM announced plans to open its first hard discount stores in Egypt in the first half of 2013. As a consequence, BIM will be leading the field in international expansion for the next few years and will have first-mover advantage in North Africa.

Prospects in the medium term Between 2013 and 2017, Migros Ticaret is predicted to experience average annual store expansion rates of around 5 percent and sales growth of around 8 percent. However, BIM (predicted sales growth of approximately 13 percent) and A101 (approximately 25 percent) are still expected to outpace it. As a result, the gap in terms of grocery market share between Migros Ticaret and market-leading retailer BIM is set to widen. On the other hand, the gap between Migros Ticaret and third-place A101 is set to narrow. Although Migros plans to utilize its ability to diversify sales opportunities among different retail channels drive growth in the supermarket sector — especially given its uniquely positioned e-commerce banner — it seems unlikely the retailer could knock BIM off the top spot in the short to medium term.