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to-business e-commerce player, announced that it is earning a profit again. Still, distribution and a strong presence in the right

bricks-and-mortar channels remain crucial to success in China. In personal care, department stores remain the most important channel, especially in Tier 3 and 4 cities. Successful traditional players are able to manage real estate and labor costs, understand local customer preferences, and take advantage of the growing online channel and competition.

Central Asia and Eastern Europe Central Asia and Eastern Europe offer fertile ground for

retailers. With economic stalwarts such as Turkey and Russia improving their standing and little “gems” such as Armenia becoming more attractive to global players, these markets have avoided the stagnation of their more developed Western European neighbors. In Turkey and Russia, retail expansion is fueled by

strong consumer demand and high levels of disposable income. The modern retail environment is becoming more diverse in these markets, with sectors such as luxury, apparel and consumer electronics booming and quickly expanding outside of major cities. Smaller countries such as Georgia and Kazakhstan may not be the first destinations for international retailers, yet their growing pockets of wealth, improving economic stability and consistent growth have proven attractive to specialty retailers. These markets are adopting modern retail formats, providing a window of opportunity for international retailers to establish presence in the region. Meanwhile, Macedonia and Albania remain attractive to some international retailers, particularly from neighboring markets, yet their potential has fallen compared to other developing markets in the GRDI because of their small size and low levels of consumer wealth. Turkey: Growing and attractive. While Western Europe

struggles, Turkey continues to grow. It moves up seven spots in the GRDI to take sixth place—its highest ranking since 2003. Based on a “window of opportunity” analysis, Turkey is nearing its peak growth stage. Turkey’s market is competitive, with expansion leading

to lower profitability. Finding available spots in attractive retail locations is difficult and has been a major reason for retail acquisitions. In coming years, retailers will likely focus more on improving store operations as the incremental returns from expansion diminish. The growing economy, favorable consumer demographics and a relatively fragmented retail landscape


make Turkey attractive to international retailers. Disposable income has increased at a compound annual growth rate of 3.6% since 2005, while the percentage of households earning less than $15,000 dropped from 53% to 45%. The middle class’s expanding purchasing power is spurring sales growth, while wealthy locals and international tourists are increasing luxury goods sales. Modern formats account for only 40% of retail in

Turkey, but new malls, e-commerce and international entries will increase this share. Modern formats now make up 46% of a fragmented grocery market, with the top five grocers accounting for roughly one-tenth of the market. Independent convenience stores called bakkals remain popular but are slowly losing share. Modern grocers are aiming for bakkals’ share by opening smaller shops, and hard discounters are making gains with price advantages. While regional grocers have consolidated in recent years, Tesco and Migros have made plans to expand with new store openings. Malls are now expanding to unexploited regions where

traditional retail reigns, while e-commerce has grown 25% per year since 2007.8 Many large international players are drawn to Turkey’s

growth prospects and low regulatory barriers: *Apple is set to open its first retail store in Istanbul in

2013. *French furniture company Conforama is expected to

open its first store in a Carrefour hypermarket. *German furniture company Porta will open its first

branded store outside of Germany. *Dubai-based international retailer Landmark Group

acquired a majority share in Turkish women’s apparel retailer Park Bravo. *Qatar First Investment Bank purchased 40% of

domestic furniture brand English Home. *French cosmetics firm Yves Rocher bought a majority

stake in Turkish beauty products company Flormar. *Premium shoemaker Christian Louboutin has

partnered with Turkey’s Boyner Group to open two stores. *U.S.-based gourmet food retailer Dean & DeLuca

opened its first store in Europe through a domestic licensee. Exits from Turkey have been limited. German DIY chain

Praktiker, facing operational and competitive challenges, left the market as part of a restructuring. Rocket Internet, a German firm with websites covering sports equipment, home accessories, and apparel, also closed down its Turkish operations in 2012.

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