Turkey emerges as an attractive market for retailers

Harvey Nichols, Ankara. It may sound incongruous, but Turkey is now the first country to boast more than one branch of the luxury retailer. Present in Istanbul since 2006, it opened its latest store last week in the concrete sprawl of the capital.

There could be few more telling signs of the economic recovery underway in Europe s 7th largest economy, set to be one of its fastest growing this year.

When economic conditions allow, Turks like to spend freely, and market expectations that GDP will grow some 5 per cent in 2010 assume a recovery powered by domestic consumers. That could make Turkey one of the more tempting markets for western retailers looking to expand outside the debt-laden and depressed eurozone.

H&M will be among the next to arrive: the Swedish-based budget clothing chain announced this month it would open its first Turkish store in the autumn, referring by way of explanation to the large, young and fashion-conscious population .

Cosmopolitan Istanbul is the first port of call for international investors, but shopping malls lined with western fashion brands are mushrooming in the regions of Anatolia.

The Demsa Group, Harvey Nichol s local representative, also has Guess stores and Mothercare branches in the coastal cities of Antalya, Adana, Mersin and Izmir. In Gaziantep, an industrial centre in Turkey s southeast, Zara, Mango and Marks & Spencer neighbour Turkish chains such as Koton in the vast marble-clad atria of a shopping mall opened last year.

Selim Kunter, an analyst at the brokerage ExpresInvest, notes that last year s scrapping of a quota on Chinese imports could encourage other international retailers who outsource production to China to enter Turkey.

Local retailers are also expanding: the Boyner Group, whose department stores anchor many malls, is expected to increase space by some 6 per cent this year and next.

With unemployment stuck in double digits, higher-end chains may fare better than those targeting lower income brackets. But spending is undoubtedly bouncing back. Data from Turkey s Trade Council of Shopping Centers and Retailers showed overall retail sales were up 5 per cent year on year in March, with non-food sales up 19 per cent and clothing sales up 31 per cent.

There are some regulatory uncertainties, including draft legislation that envisaged forcing malls to close at 6pm on Sundays to protect small retailers. But the legislation has been shelved for now, after industry protests. It would also annoy voters, who flooded to malls at weekends even in last year s recession to window shop and chat in cafes. This year, with confidence trickling back, they may be spending money as well.