Ozlem Yesildere talks to GTR about how Koton, one of Turkey’s biggest and best-known clothing brands, is working with the country’s export credit agency to build a successful retail exporting empire.
GTR: What is your experience of being an exporter in Turkey’s current business environment?
Yesildere: Turkey is well positioned in the textile industry and we are actively leveraging the Turkish fashion and textile ecosystem to react to fashion trends faster, and in a competitive way. As much as 85% of Koton’s products are produced in Turkey. We also have about 200 stores outside Turkey across 29 other countries. This helps us balance potential volatilities in various markets.
Koton has also been leveraging ‘Turquality’, Turkey’s national brand-building programme in the international arena, for more than 10 years.
GTR: How has the Turkish financial market evolved over the past year?
Yesildere: The Turkish financial market had a challenging year in 2018, especially with the significant foreign exchange volatility around August and September, and the tightening of liquidity. Turkey’s five-year sovereign credit default swaps reached a maximum value of circa 570 basis points in September 2018, which coincided with Turkish banks’ refinancing timings – they borrow in the international syndicated loan market about twice a year. As such, by late November, almost all top-tier banks had rolled over their autumn maturing loans.
Accordingly, in 2019 the sentiment is stabilising, and funding opportunities have started to increase. In this new environment, where risk factors are minimised, the local business environment has started to become more positive.
GTR: What are your trade finance needs and are they being met?
Yesildere: As we grow our businesses in existing markets and expand in new geographies, finding the right trade financing options is obviously important. As such, we are mainly leveraging Turk Eximbank in countries where we operate through franchises. That said, this does not support the businesses in the countries where we operate through our own stores. We are currently working on developing alternatives in this area.
GTR: What is your experience of working with Turk Eximbank?
Yesildere: Turk Eximbank has been a good business partner to enable the growth in the export markets. Nevertheless, there are opportunities to further enhance Turk Eximbank support for exports to countries where we operate our own stores. In these cases, Turk Eximbank factoring processes do not apply as we are selling to affiliated companies. We are working on alternative solutions with Turk Eximbank to increase their support for our own retail business-related exports.
GTR: Do you also use other financing solutions?
Yesildere: We may make use of factoring companies and supply finance programmes of commercial banks. We want to have a differentiated pool of trade financing partners.
GTR: What challenges are you facing when it comes to exporting goods?
Yesildere: I would not call it challenges but we need to manage our processes carefully. We operate through a wide variety of geographies, from the warm regions of UAE and Morocco to cold zones, such as Russia. Understanding the consumer and offering the right balance of localised collections at the right timings is important.
As the majority of our exports are sold to final consumers through our own stores, it is critical to understand the business, tax and full legislative environment, and to grow the businesses at the right pace. When operating in a country through franchises, finding the right partner with the right business focus and financing capability is crucial. In the geographies that we operate, the customs legislations and controls might lead to long lead times, which also needs to be closely monitored.
GTR: Does Koton have plans to expand its exports to any new regions? Where are you seeing strong growth?
Yesildere: Our aim is to further expand in our current geographies through maximising sales in existing stores and opening new stores. We are increasing sales in Northern Africa alongside our key export markets like Russia, Kazakhstan and the Balkans. In smaller markets, we are growing through the franchise model. In the medium-to-longer term, we will consider investing in new geographies.