Techcrunch wrote 2 years ago “If there’s one thing I keep hearing over and over when it comes to the European start-up scene, it’s that investors who are not seriously looking at the Turkish market may be missing out on some of the continent’s biggest digital companies in the next 10 years.”
Turkey has changed, massively. And with the changes in Turkey, the Turkish internet environment changed.
So let’s start with some facts about Turkey online market:
Turkey has 36 M internet users. A figure which is also confirmed by Comscore and Turkish Telekom. This makes Turkey to the fifth biggest internet population in Europe (after Germany, Russia, UK and France) and number 11 in the world in % of internet penetration.
The eCommerce volume behind the Turkish market is big and provides the potential to become much much bigger than today. The only reliable method to have an estimation on the eCommerce volume starts with the BKM data. As we know, not all registered transactions are directly linked with internet transactions.
If we exclude this kind of transactions, we believe that Turkey had in 2012 a eCommerce volume (including travel, classifieds revenues, marketplace GMV, dating) of 15.3 B TL (8.6 B USD).
The number of those users who spent money on the internet is estimated with 10 M users. There is no official number for this but it could be perceived as the consensus range of all estimates. If you assume the higher end of this range, the eCommerce penetration rate is 27% (of all internet users) which still leaves a great potential for the future. In countries like Germany or UK, the eCommerce penetration rate is around 60%. Exactly this number is creating an enormous push on the Turkish eCommerce market. What would happen if Turkey reaches the 60% eCommerce penetration rate? In a few years from now… Just make the math, and you will understand why eCommerce is hot in Turkey (for founders and for investors)
Turkey is Facebook country No. 7 (Facebook users) and very close behind the UK. But not only on Facebook, the Turks are also very active on other services. Turkey is country No. 11 for Twitter and No. 14 on Youtube.
The Turkish online user is young: 70% of all online users are younger than 34 years (i.e. only 39% of all internet users in the UK are younger than 34 years).
Another reason for the eCommerce friendly environment is the high credit card penetration. Turkey has 54 M credit cards (2012) and a credit card penetration rate around 60%. Compared to Europe where the credit card penetration rate is lower than 50% (the UK leading the credit card penetration rate with 67%), Turkey is an El Dorado for eCommerce companies as they do not have the problems of Russia and some other Central and Eastern European countries with “cash on delivery” (which triples your return rates).
The B2C logistic infrastructure is also extremely well developed. Turkey has many competing delivery companies. Just to give an example: Markafoni is able to deliver any order after shipping to the customer in 24 h if the customer lives not more than 600 km from Istanbul away. For almost all other distances it takes the delivery companies 48 h. Even to a small village at the Iraqi border.
And in 2011, Turkey experienced two big transactions (eBay acquiring GittiGidiyor and Naspers acquiring Markafoni) which delivered new valuation benchmarks and showed that Turkey has an internet market delivering three digit M USD valuations. Yemeksepeti had another big deal in 2012 with General Atlantic and proved again to be the strongest online food delivery company in the world. Beside this mega deals, many companies are announcing the closing of another A-Series, B-Series etc. Tiger Global, Intel Capital and many others started to participate at the growth of the Turkish online market.
Beside all the facts and figures, there are so many observations which are so difficult to capture in statistics. Like the story of eTohum, a seedcamp like incubator, which is receiving hundreds of business plans each year and has managed to present every year 2-3 start-ups which have been very successful later. But also the story of Rocket Internet in Turkey: Rocket shut down all operations in 2012 and fired hundreds of employees. After only one year, Rocket left Turkey. So many stories to tell but if I had to reduce the Turkish internet market to two headlines, I would say COMPETİTİON and SPEED.
Let’s start with competition. Turkey’s first group buying company was Groupon – launched April 2010. Today we have almost 200 group buying companies in Turkey. Groupon lost the market leadership to Grupfoni and the top 3 players control approx. 80% of the market but there are still 200 other players here. How many group buying players are active in Germany or in France? Two dozens? The only two countries with a similar level of competition are Brasil (400 group buying companies) and China (4000 group buying companies). The competition in the Turkish market is not limited to group buying. There are almost still 16 flash sales companies or almost 10 local video sites etc. The competition shapes everybody and is creating highly efficient markets. Turkey is the market of Digital Darwinism.
Speed is another key word for Turkey. The entire country is on speed but the internet sector especially. The decision making processes are fast (everybody who has ever done business in Turkey will confirm this), the end consumers expectation levels are high (almost all eTailers deliver within 48 h) – speed counts on many levels. I have never seen a market which is so focused on speed.
The main bottleneck of Turkey is still a lack of capital but after the deals of GittiGidiyor, Markafoni and Yemeksepeti, I am sure that this obstacle will disappear soon. Every time I meet a Turkish start-up they tell me how many (non Turkish) investors they have met. And the bigger companies started to develop and execute a global vision.
Turkey is hot: A big domestic market with many young users who love to spend time online. Facebook, Twitter, Youtube are heavily used. The Turks spent significant amounts of money online and we all know that this is just the beginning. The second biggest credit card penetration rate in Europe and the very well developed logistics network provide a great infrastructure for the further development of eCommerce. The lack of capital disappears day by day and I am looking forward to all VC funds preparing to enter Turkey.
If we turn back in three years from now, we might say “these years have been the golden times for investment in Turkey”.
A sleeping giant is awakening right now. The future is bright.