Turkish e-commerce growth stymied by logistics problems

Nearly 85 percent of e-commerce in Turkey is carried out in the northwest, west and centre of the country with lack of logistics in other regions putting people off taking their business online, a report by the Turkish Industry and Business Association (TÜSİAD) and consultants Deloitte Digital said.

It said 84 percent of e-commerce is in just three of Turkey’s seven regions - the Marmara, Central Anatolia and Aegean, with 56, 16 and 12 percent of the volume respectively. 

Infrastructure is important: A Centre for International Governance Innovation (CIGI) study cited in the report showed that 17 percent of users do not shop online due to issues with logistics. In the World Bank’s Logistics Performance Index (LPI) for 2018, Turkey ranked 47th out of 160 countries. 

Unsurprisingly, the impact e-commerce has on the gross national product (GNP) correlates with internet penetration levels. For Turkey, the e-commerce market size was found to be $6.1 billion, while the gross national product (GNP) was $766 billion in 2018. 

An increase of 10 percent in internet penetration correlates to a 1.8 percent increase in gross domestic product (GDP), said the report.

With the youngest population in Europe (12.9 million people aged between 15 and 24), Turkey has great potential for local and global companies, the report said. This young population is also a fan of connectivity - Turkey comes only slightly behind Europe, the global leader in internet penetration, with 72.9 percent against Europe’s 79.6 percent. As of 2018, internet connectivity across the globe is slightly higher than 52 percent. 

According to the Information Technologies Authority (BTK), there are 61 million mobile broadband internet users in the country, out of 80 million people in total.

Two-thirds of internet users in Turkey (63 percent) use social media, according to the report, only six points behind the world-leader, the United States. YouTube is used most actively with 92 percent, followed by Instagram’s 84 percent. 

One platform that stood out was Pinterest, where three quarters of users (72 percent) with no intention of shopping end up making a purchase after being inspired by the digital moodboard, the report showed.

Just as important as inspiration is access - access to transborder payments, specifically. Online payments company PayPal’s 2018 Cross Border Consumer Research report showed that the Middle East was the region with the most consumers who shop exclusively or partially across borders. Financial services like Visa, Mastercard and PayPal need to provide global solutions.

The report cited Interbank Card Centre (BKM) data for 2018, and said the number of credit cards in Turkey rose to 66.3 million from 2017’s 62.5 million. Users have an average of 2.2 credit cards each. But PayPal withdrew from Turkey in 2016 when the company was refused a licence by the Banking Regulation and Supervision Agency (BDDK).

Despite the lack of PayPal, and a decrease in the number of websites for holiday bookings, multi-channel retail and online retail, Turkey’s online shopping increased by 42 percent, said the report, and total revenue for online sales in Turkey for 2018 increased to 60 billion liras ($10 billion) from 42.2 billion liras in 2017.

Consumers shop in digital marketplaces for clothing, electronics, food, holidays and books in Turkey, in this order. The biggest sellers are mobile phones (50 percent of electronics) and nappies (53 percent of children’s goods).

The biggest digital marketplaces in Turkey were listed in the report were N11 and Hepsiburada. Trendyol, which received investment from Chinese giant Alibaba in 2018, is another key player, according to the report.

The report also offered advice on legislation infrastructure and said: “National coordination must be provided for logistics regarding trans-border packages and foreign trade, logistics and other stakeholders must act together and in harmony with NGOs as well as public bodies.”

In mid-May 2019, Turkey removed all customs tax exemptions, as announced in the Official Gazette. The tax-free limit had been reduced over the years, from 150 euros to eventually 22 euros, with electronics and cosmetics in particular excluded from the exemptions. Turkey now imposes an 18 percent customs tax on goods from the EU, and 20 percent for the rest of the world.