30 Oct 2013
Turkish businesses eye global rag trade in light of mainland price hike
Buyers and exhibitors at Texbridge, one of Turkey's leading textile and garment fairs, look to capitalise on rising prices for mainland exports amid falling local costs, but is this more about bravado than business?
With salaries on the mainland widely seen as on the rise, are businesses around the world sensing its payback time after years in the shadow of the mighty Chinese economy? Certainly, there was a touch of glee among companies and buyers at this year's Texbridge, one of Turkey's leading textile fairs.
Are Turkish manufacturers right in seeing an opportunity for them to capitalise on the higher prices now demanded by their Chinese counterparts? Or is it just a touch of hubris among disenfranchised producers, long left to gather the crumbs from the international fabric trade?
Certainly the facts show a slight downturn in Turkey's trade with China. In 2012, the country imported US$1.7 billion worth of clothing-related products from mainland companies. Impressive though this is, the figure is still down some US$300 million on 2011, partly due to tariffs imposed by the Turkish government.
While this shows more signs of Turkish protectionism than any true indication of China's decline as an exporter, a number of attendees at the Istanbul event predicted a tough time for the mainland's garment manufacturers in particular. According to some local manufacturers, they can now foresee a time when the cost gap between Turkish and Chinese producers is a thing of the past.
The silk sector is a clear case in point. At present, China dominates the international sale of silk yarn. Up until 1991, however, Turkey produced 15% of the world's silk supply. When the mainland entered the international market in the late 1980s, it was supplying the material at an unmatchable US$4 per kilo. Its prices, however, have risen dramatically in the intervening years.
Tahir Mert, a Turkish businessman trading out of Izmir, has been working with mainland companies for 25 years, but he now sees the balance of power shifting somewhat.
He said: "At one time, Turkey, Greece, Italy and Brazil were all major producers of silk yarn, but that has long stopped. At the moment, only India and China are in the market. With Chinese salaries rising, though, the gap in textile prices is closing.
"Two years ago, we could produce silk for US$12 a metre, while the Chinese price was still $9. Now, though, the Chinese price is $10.5-$11, while ours is still $12."
Despite the remaining price differential, Mert believes that Turkish-made fabrics may win out in terms of overall quality and the technical superiority of the dyes used. He also maintains that Turkish companies adhere more strictly to product safety guidelines than do some of their Chinese counterparts.
Aside from technical issues, some local businessmen were keen to promote other benefits of using domestic manufacturers. Istanbul-based Feyzullah Özdemir is currently partnered with a Chinese garment company, but claims the relationship can be challenging.
He said: "As there is a six hour time difference, I find myself telephoning China to organise a shipment at 4pm their time, only to find either everyone has either gone home or that the paperwork cannot be completed until the next day.
"There is also the fact that our Chinese partners don't start work till 10am. By comparison, the local Turkish companies are more hardworking and have greater technical knowledge, much of it gained from wider experience across Europe. Overall, I would say there's just a greater hunger for the work in Turkey."
Özdemir's current plan is to buy machines and materials from China, with the aim of being in a position to sell textiles back to the mainland within 10 years.
While admitting his project faces a number of challenges, he believes it looks far from impossible. He said: "I have a friend who already sells Turkish-made leather shoes into China. I believe the Chinese domestic market is huge and, within a decade, its demand for luxury goods will be massive."
Firat Özpehlivan is another Turkish businessman with mixed feelings about his 25 years of trading with China. As the owner of EMR, a button and accessory company based in Esenyurt, he has had a number of run-ins with his suppliers over the years.
He said: "You order an iPhone and you are sent a calculator… I have learnt, as a result, to be very careful in terms of product specification.
"Chinese companies regularly approach me to buy, but their prices are so low I have to wonder about the quality on offer. I have to consider whether they are using uncertified chemicals or if the alloys in their metal components are of a poor quality, meaning, zips for instance, may break easily.
"Six or seven years ago, we were importing 90% of our goods from China, but our anti-dumping laws and new tighter, health regulations have had a drastic effect in that area.
"Now, if I buy a consignment of products that contravenes Turkish law, I have to pay to have it destroyed. Then I have to buy new stock to meet my own customers' needs. Unless you have an overseas supplier that you know well, it's not worth the risk."
At present, Özpehlivan travels to China around five times a year, mainly to buy zip-making machines and polyester buttons. Despite the distance involved, he finds having face-to-contacts essential for his business.
He said: "The most important thing in business is trust. People must keep their promises and, with some Chinese suppliers, that is not always the case.
"Of course, there are some very good companies on the mainland. There can also be a lot of 'misunderstandings' when it comes to doing business there."
He also believes that Turkey's domestic textile and textile accessories industry is now poised to have an impact on the mainland. As proof, he cites the fact that a number of global brands – notably Zara – are now importing textiles from Turkey.
On top of this, he says Turkish companies are starting to get their act together in terms of customer service – with one local business, for instance, now offering to deliver bespoke button and accessory samples within three days.
As with Mert, he also believes that part of the problem facing the mainland is that its hunger for business has declined. He said: "I believe some of the Chinese desire to export has subsided. Companies there have made a lot of money over the last decade, with many of them now more keen on focussing on their domestic market. In truth, they seem fed up with the hassle of dealing with foreign regulations."
Özpehlivan's views are far from representing a consensus, however. Zeynure Sabir, a Turkey-based expert in trade with China, for instance, has a very different view.
She said: "Turkish companies can still source more cheaply from China than they can do locally, even after tax. Chinese companies are now using Turkey to access the West and also to make inroads into the lucrative Russian market."
In line with this, one exhibitor, Deniz Paksu, an account manager with Mem Tekstil said she had been approached by a number of Chinese firms looking to buy fabric to sell to Russia. She said: "As well as raw materials, they also want to produce made-up garments for the Russian market."
Perhaps tellingly, there were no Hong Kong or mainland exhibitors at this year's Texbridge event. This is despite the event, now in its third year, being well-established on the trade calendar for the Turkish fabric business.
Explaining their absence, one Turkish exhibitor, who declined to be named, said: "I believe there was a definite move to exclude companies from Hong Kong and China, although they are well-represented at other Istanbul fairs, particularly the Evteks home textile exhibition."
Such exclusion, if borne out by fact, underlines the rivalry and ill-feeling between Turkish and Chinese companies in the sector. It doesn't, however, preclude Asian companies from doing business in the country, with some 20 Chinese textile companies apparently already operating in Turkey.
Ekrem Arslan, a local business analyst, said: "Despite the import taxes, it is still relatively easy, in financial terms, for Chinese companies to trade with Turkey. Local companies, however, are now looking for quality not just for the lowest price."
This, though, seems to be an issue that some Chinese manufacturers are already addressing. Tunca Tezer, a sales co-ordinator for Istanbul's Genç Mert Tekstil has been working with companies from Hong Kong and China for six years. He has found himself impressed by them in a number of ways.
He said: "We buy yarn from China and weave it in Turkey. While we always have to be careful about quality, we have found that that quality is increasing. Overall, in a number of areas, the yarn technology in China is superior to that in Turkey."
Another local trader who has had positive experiences with Far East suppliers is Nuri Güreler, owner of a retail outlet and wholesale business in Istanbul. He has been buying fashion accessories from Hong Kong and China for over 18 years now.
He said: "I go to Hong Kong and China to get different design ideas. I come across ideas there that you just don't see in Turkey. Currently, I source 20% of my products in Hong Kong and China, with the remaining 80% coming from Turkey.
"Even though prices in Hong Kong are very high now – they have increased five-fold over the last four years – I find the quality is far more reliable. By comparison, in China the prices are far more competitive, but you have to keep an eye on the quality."
Commenting on the changes he has seen over recent years, he said: "One new development is that Chinese suppliers are now more willing to deal in smaller quantities. This will inevitably attract more buyers.
"In general terms, some Chinese factories are truly excellent, but you have to shop around. One problem is that the quality can vary even in the same factory on a month-by-month basis.
"I'd say we probably encounter problems with one deal in 10 in China. Having said that, though, if we can find unusual items at the right price then we are happy."
|Will global brands be wooed by Istanbul?|
The Texbridge Textile and Accessories Fair 2013 was held in Istanbul from 9-11 October.
George Dearsley, Special Correspondent, Istanbul