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Turkish Gift Sector Hopes to Curb Long-term China Dependency

Concerns over currency fluctuations, shipment times and substandard goods have seen many Turkish companies keen to source far more items locally, while acknowledging the pre-eminent role of China as their current supplier of choice.

Photo: Capping them all: Chinese hats head to Turkey.
Capping them all: Chinese hats head to Turkey.
Photo: Capping them all: Chinese hats head to Turkey.
Capping them all: Chinese hats head to Turkey.

Chinese mainland companies may be missing out on a dynamic promotional gifts and premiums market in Turkey worth US$8 billion due to currency problems and shipping delays. That was the warning from a number of Turkish companies attending the annual Promotürk trade fair in Istanbul last month.

Overall, it seemed that a number of Turkish companies were unhappy that the yuan continues to be linked to the dollar. As the US currency – and the yuan – strengthens against the Turkish lira, the cost of conducting business with mainland companies inevitably rises.

According to Mustafa Köleoğlu, Chief Executive of Ankara-based ASYA Promosyon, his overheads increased by around 30% between July and September this year. He said: "The Turkish and Chinese governments deal with each other directly – yuan to Turkish lira. For businesses like us, though, it is very difficult. We cannot sustain these rises."

ASYA, a 25-year-old business and one of Turkey's top five gifts and premiums companies, deals in thousands of items – from baseball caps and clocks, to umbrellas and key-rings. It currently buys around 60% of its stock from China.

Clearly frustrated by the current situation, Köleoğlu said: "But for the exchange rate problems, we believe we could grow our business with China by around 40%."

Currency issues aside, he also had a number of concerns with extended shipping times, saying: "We ordered a container in February, but it was not dispatched until September. Our suppliers claimed it was due to a lack of employees, as they said the Chinese government was focussing on the country's agricultural industry. Whether this is true or just an excuse, we don't know.

"It is a shame because we have potential customers in Germany who we can reach in four or five days. We cannot service them, however, because of the minimum two-month shipping turnaround from China. As a result, we are now starting to source some items from Turkey.

"We have been importing from China for 10 years, but in the last two years the transportation delays have worsened."

The company has also experienced packaging problems with its imports. It claims one consignment of crystal clocks was particularly badly damaged, largely because the packaging used in China was too thin.

Similar delivery issues were cited by Iletir Promosyon, an Istanbul-based gifts and premiums company that started buying pens from China around eight years ago. Ilkan Iletir, the grandson of the company's founder, said: "It is frustrating because we don't want to hold large stocks. We also have quality issues. If we order 50,000 pens, some 3% will not work."

Caution was urged by Istanbul-based Arin Promosyon, a company said to be one of the sector's fastest growing stars. It was founded three years ago by entrepreneur Ali Özbilen, who has worked in the industry for 12 years. He now buys around 40% of his items from China.

The company's success has been based on its "just-in-time" proposition, an approach that combines low stockholding and quick turnaround times. Explaining the firm's USP, Özbilen said: "We have become especially strong in supplying electronic goods, such as mobile phone chargers."

Focussing on his dealings with China, he said: "With electronic products, quality is paramount. You have to be very careful. During visits to China I have been taken to a factory to monitor its manufacturing process and quality control methods only to discover later that they ‘borrowed' the plant just for my visit. They didn't manufacture there at all.

"If you're cheated there seems to be no government department you can complain to. You just have to put it down to experience.

"While the Chinese want to secure the order, sometimes they are very small-minded when it comes to customer service. They will not round off an order running into tens of thousands of dollars, insisting the last 100 dollars is paid.

"In Turkey, by contrast, it is customary to give a bit of a discount as a thank you. When I query it, my contact says: 'Sorry, I am not the boss.' With that attitude, though, he will never become a boss."

Photo: Esen: “Changing purchasing patterns.”
Esen: "Changing purchasing patterns."
Photo: Esen: “Changing purchasing patterns.”
Esen: "Changing purchasing patterns."
Photo: Kaplan: Shipping concerns.
Kaplan: Shipping concerns.
Photo: Kaplan: Shipping concerns.
Kaplan: Shipping concerns.

Despite these concerns, many Turkish businessmen also see a considerable upside in their dealings with mainland companies. Özbilen, who has visited China five times, said: "In general, I have been very impressed by the way Chinese factories are organised and mechanised. They are much more efficient than such installations in Turkey, which still tend to be very labour intensive. In Turkey you'll find one machine and six staff – in China there's six machines and one member of staff.

"There is also real competition in China. If one company is seen to be doing well, its rivals will try to find out why and work hard to match it.

"My only other criticism is that the Chinese can sometimes be a little blinkered. If you ask for a product and they don't make it, they will just say no. They won't try to innovate and see whether it can be done."

According to Özbilen, the promotions industry in Turkey is growing very fast. He said: "There are new products and ideas appearing every day.

One recent innovation is flowers-in-a-can. You can send someone a can, they open it, put some water in and a flower grows at their desk.

"To be honest that idea came from Europe, but the trick is always to find the next product that will capture customers' imaginations."

The sector has grown to such a degree that its trade association, Promotürk, now boasts 135 members. There are also said to be hundreds of other companies hoping to meets its strict sign-up criteria.

Assessing the overall growth of the sector, Ibrahim Esen, Promotürk's General Secretary, said: "The sector is booming. Normally it is worth between US$1 billion and $1.6 billion. When elections are on, however, this can rise to between $7 billion and $8 billion. Political parties and local councils are always the biggest spenders."

Esen also believes that a distinct change in Turkey's purchasing patterns is on the cards. Currently, around 60% of Turkey's foreign imports come from China. In the next five to 10 years, though, he believes that will halve as Turkey broadens its manufacturing base.

Arguably the biggest company in the sector at present is Istanbul-based On-net. This business, too, would be keen to source more items domestically.

Ali Gürkan, the company's Export Sales Executive, said: "We have lost orders because our Chinese suppliers cannot deliver in time. It is very annoying. We currently import between 40% and 50% of our goods from China, largely because the Chinese are really very good at copying."

Another – less obvious – problem, according to Gürkan, is the explosion of spam emails now coming from China. He said: "We are missing vital emails from China because we are getting so much spam. As soon as you see it is from China, you tend to hit the delete button."

For Emir Kaplan, a Sales Representative with the Zirve Group, it is the minimum two-month transportation time that outweighs any email issues. At present, Zirve imports vacuum cups and flasks, power banks, USBs, purses and umbrellas from China.

Kaplan said: "About seven years ago we imported 10,000 pens. None of them worked. That, however, was an exceptional incident."

Despite many Turkish businessmen predicting a rise in domestic production, not all of them are so sure. Orhan Sarikaya, one of the Founding Partners of the Orsay Group, believes trade with China will continue to grow.

He has been particularly impressed with one recent new import – a plastic device selling for around US$1.75 that allows you to stand your mobile phone on a table. Orsay is also importing electrical components and assembling its own electronic devices in Turkey.

He said: "Turkish import taxes on finished electronic goods are prohibitive so this is the way forward. Exchange rate problems, however, may work against us. Even if we move very quickly we could still lose money if the lira rates fall against the dollar."

Photo: Gifts and incentives: Can Turkey become more self-sufficient?
Gifts and incentives: Can Turkey become more self-sufficient?
Photo: Gifts and incentives: Can Turkey become more self-sufficient?
Gifts and incentives: Can Turkey become more self-sufficient?

The Promotürk fair was held in Istanbul from 3-6 September 2015.

George Dearsley, Special Correspondent, Istanbul

Content provided by Picture: HKTDC Research
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