TURKS AIM TO DEVELOP BRANDS
Byline: Robert Murphy
ISTANBUL, Turkey — Turkey has the needles, now it just needs the labels.
Garment manufacturers here say the future of their industry lies in its ability to create recognizable fashion brands. But judging from the International Istanbul Fashion Fair here last week, the industry still has some challenges ahead, not the least of which is dealing with quota issues.
Ninety-four exhibitors set up camp at the fair, held from Feb. 15 to 18 in a show space about an hour’s drive from the city center. The business being conducted, however, was not prospecting for the next hot Turkish name — even if four up-and-coming local designers showcased their looks in a high-energy runway presentation. Instead, a handful of international fashion firms and retail chains were hunting for manufacturers to produce their wares.
In this respect, Turkey has a lot to offer. The country’s garment trade, which is estimated to have exceeded $30 billion in sales last year, is one of its most important industries. It accounts for 25 percent of total employment, 5.5 percent of last year’s gross domestic product of $212 billion, 27 percent of industrial output and 28 percent of exports, according to Gungor Kesci, president of the Turkish Clothing Manufacturers Association. He added that Turkey is the world’s fifth largest garment exporter, behind the U.S., Italy, Mexico and China.
The size of the industry is largely thanks to international fashion firms that turn to Turkey to source their private label garments. Kesci said only about 10 percent of finished garments exported from Turkey carry a Turkish brand. Indeed, the fair was set up last July with the task of helping the Turkish industry blaze a path toward further brand development.
“Brand development is the key to growing the industry here in the future,” he said. “But it’s not something that’s going to happen overnight, it takes time and investment. The [fair] is a formative step in helping try to create a forum for brands to reach out to an international crowd.”
In its second session, the fair suffered from an unexpected and dramatic downturn in the Turkish economy. For one, the number of firms exhibiting in the fair declined sharply. There were 150 exhibitors at the debut show last July. Organizers attributed the drop in participation to the banking crisis that shook the country late last year. In December, as a result of the crisis, interest rates rocketed more than 1,700 percent in the space of just a few days. Inflation also has soared, and many garment companies here have been threatened by the ensuing economic hardship, according to Kesci.
And the country’s economic woes have recently deepened. After spending $4.5 billion last month to prop up the Turkish lira, Ankara allowed the currency to float freely. Subsequent to the decision, the currency fell 36 percent, the value of Istanbul stocks lost a third of their value, and interest rates have soared as high as 5,000 percent. The crisis also has produced a public dispute between Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer, raising the specter of government collapse.
Back at the fair, Samir Gandhi, manager of the Leicester, England-based Glenrose Textiles Ltd. exporting house, largely specializing in sourcing nightwear for British distributors such as Tesco, said he found several firms that did not participate in the fair in which he could eventually be interested in contracting business. Currently, he said, most of his sourcing business was done in China and India.
“But Turkey,” Gandhi said, “is very attractive because the quality here is higher and the lead times are significantly shorter.”
Compared to China and India, which Gandhi said take between 90 and 150 days to deliver products once an order is placed. A similar order placed in Turkey can be executed within four to six weeks.
“We are starting to realize that to be competitive in the fast-moving world of fashion, we need to cut down on our lead times,” said Gandhi. “This, in and of itself, justifies the slightly higher price in Turkey.”
Gandhi said prices in Turkey were about 10 to 20 percent higher than in China or India. “Turkey will also give me a quality level one notch over the Chinese or Indians,” Gandhi continued. “Not only are the textiles higher quality, but the fabrication is also superior.”
Meanwhile, Gap Inc. said it has increased its business here over the last five years, when it first started working with Turkish manufacturers, from $15 million to more than $200 million in 2000.
“The Turkish market is very attractive for several reasons,” said Ayse Gencfoy, sourcing manager of Gap’s Old Navy division. “The manufacturers here are innovative, the quality is good, as is the price.”
Gencfoy said Gap intends to increase its sourcing business with Turkish mills.
“Working with Turkey has become easier in recent years,” she said. “Firms here are getting used to exporting and they run highly vertical operations, offering textiles to finished product. Also, it only takes between six and eight weeks for us to receive a finished product once it is ordered. This is significantly shorter than China.”
Still, Gencfoy said that recently Gap has run into a problem doing business with Turkey: quotas.
“As we increase the amount of business we do here, it has become an issue,” she said. “We have started to scout sourcing possibilities in neighboring countries such as Romania and Bulgaria.”
According to Kesci, U.S. quotas are scheduled to be revisited by Washington in 2005, and he expects a “positive decision.”
Kesci, who also runs Gals, a garment firm here that sources for several American firms’ private label lines, says that last year, for example, his business was reined in due to quotas.
“By mid-October, we couldn’t do any more business with the U.S. because industrywide quotas were reached.” Citing an example, he said Turkey is limited to exporting no more than 20 million pairs of trousers to the U.S. per year.
“There are about 7,500 Turkish garment manufacturers exporting around the world,” said Kesci. “And as more people turn to Turkey, the quota issue becomes more palpable.” He said that last year was the first time Turkey reached U.S. quotas, grinding business to a halt before yearend.
Meanwhile, Kesci outlined several fledgling initiatives designed to help the Turkish industry move into the future. He said the government is in the initial stages of a campaign designed to increase the image of Turkish clothing.
“When you think of Turkey today, you think of less-expensive clothing,” said Kesci. “There is talk now about how to create a brighter image for our clothing industry.”
Still, Kesci admitted, the project is in the development phase, with no concrete measures scheduled for the near future.
Creating brands also is important for the future growth of Turkey’s sourcing business, said Kesci. “Because China and India are less-expensive alternatives, we have to create added value, which includes anticipating trends and colors. This only can be done by brands that need to keep on top of the trends.”
According to fair organizer Mehmet Somersan, 7,000 people attended, including 250 international visitors, representing a decrease of about 40 percent. He attributed the decline to current economic difficulties in Turkey.