BMD Perakende Zirvesi 2025- Sn. Vahap KÜÇÜK - Türkiye'de ve Dünyada Perakende Sektörü Nereye Gidiyor

Welcome. Thank you. Welcome.

Welcome. Thank you.

First, I'd like to greet all guests. Bon appétit. The program has been quite delayed. I hope we can finish quickly without tiring anyone too much, since work continues. I thank Chairman Selam and the board. I hope we'll benefit from this. Now, 2024 started with the lingering effects of the pandemic, followed by the Russia-Ukraine war, then Israel-Palestine, the Gulf, and the government's medium-term austerity and inflation-reduction policies. That's the kind of year we started with. As a sector, we were pessimistic and entering a difficult period. But we ended 2024, in our own case, with some growth in units—12% growth in dollar terms.

Of course, it could have been better. The tourism sales we expected unfortunately didn't materialize. The composition of incoming tourism wasn't suitable either—the lack of sufficient Russian and Middle Eastern tourists, or the low income level of those who came, or the lira being overvalued—these were all negative factors. But looking at the retail sector, especially apparel and textiles, we were still grateful. At least the stores were open and customers were visiting. We ended the year that way.

When we look at the first three months, the last month was the Bayram month. Ramadan Bayram was the most important shopping period for our sector. March and April weren't bad. January and February were relatively tougher. February is always tough. But April, though not like past Bayrams, was a month of recovery. As VA 22, we hit our target in value but fell behind in units during the first three months. Unfortunately, weather conditions are seriously affecting us—on April 15th it snowed, there were blizzards, roads closed, schools in Ankara were shut down. We're nearly experiencing a frost disaster and agricultural calamity in many cities. This has seriously impacted the apparel retail sector.

Unfortunately, this climate is not predictable. You plan your season six months ahead—you decide that in April these products will sell, you move into summer items. But then you face unexpected weather conditions. You can't put out winter products in April—there are no consumers. Men especially don't buy summer clothes without sweating or winter clothes without freezing. Women still visit and shop, but men unfortunately don't purchase without actual need. Temperatures around 21-22 degrees are critical for us—once it passes that, summer products sell. That's why we monitor weekly what the temperature will be, which regions of Turkey are in what condition—it's one of our most important concerns.

Our Tim Chairman, Mustafa Bey, touched on this earlier. In recent years, every country has prioritized protectionism. For example, when we entered Morocco there was zero customs duty—zero. Same in Algeria, Tunisia. But now we face around 30% customs duties. We're all witnessing Trump's tariff impositions—one day 100%, the next he says he reduced it to 25%, then 10% on some countries, 55-60% on others, and he's deferred for 90 days. Since we don't know what he'll say tomorrow, it's impossible to discuss this from today's standpoint. Even if tariffs from 90 days ago were implemented, I don't believe Turkey could sell products to America—Bangladesh faces 30% tariffs, and at 130% with our current costs and exchange rate, selling to America is difficult. We're still expensive, and that's why we're expensive. The tariffs don't give us an advantage in the American market.

Where it could provide advantage—currently, since European retail is also struggling, and our competitors in Bangladesh, Myanmar, and India have capacity gaps, as they keep lowering prices it becomes harder for us to match those prices. First, European retail needs to open up, and American retail needs to open up in apparel. Those capacities need to fill. After they fill, maybe they'll turn toward Turkey. These would be products requiring fast production, more specialized items, and companies preparing collections in Turkey would have an advantage. But Turkey has seriously lost blood in textiles and ready-to-wear over the past two years. Our Tim Chairman has been closely highlighting this—Turkey has lost considerable competitiveness in this area.

Is Latin America an exit door? I visited last year—I went to four countries: Venezuela, Panama, Dominican Republic, and Costa Rica. We have stores in these places, plus in Chile and Ecuador. It's a developing market, perhaps 10-20 years behind Turkey. The difficulties include distance and reverse seasons—their summer is our winter. But we've encountered unexpected customer demand. The main reason is our partner there—a Lebanese-origin investor who knows retail, has shopping centers, and operates in four or five countries. Having entered with the right partner gives us a major advantage. The first couple of seasons were tough. When I went there, we had misjudgments—I personally witnessed stocking fur-collared coats in 30-degree weather. The disadvantage of unfamiliarity with the geography. But now we know exactly what customers want and which products sell in which season. We're continuing to grow. Argentina is on our agenda, and we'll deepen in existing markets. Latin and Central America has become an interesting market for LC Waikiki.

Actually, garment production is leaving China. Where are Chinese investors putting their money now? Myanmar, neighboring countries, Egypt. Garment manufacturing has become expensive there, though fabric production continues. They still compete in fabrics, but they've also lost competitiveness in garments. Nearby, Myanmar's minimum wage is 100-125 dollars, Bangladesh 100 dollars, India 125 dollars, Egypt 150 dollars, but in China it's 1,300-1,400 dollars. They're losing competitiveness in garments too. Would they come to Turkey? No—Turkey is expensive. They won't come. There's no collaboration possibility. Turkish textile or garment companies aren't expanding capacity or investing today. Everyone's calculating how to shrink, not grow. If someone has two factories, they're closing one. This could happen in different countries—Egypt, Myanmar, India. But investing in Turkish textile and garment in this environment is difficult. Our work is hard. Looking at our affiliated companies' balance sheets, they're not calculating profit—how to lose less. It's tough.

Bülent Bey gave very good examples about change. Change is truly painful. We say 'change before you change'—but we wait until we're on our deathbed to change. Unfortunately, once the patient is critical, we can't bring them back. That's why I believe companies need to change when they're at their strongest. LC Waikiki started as a manufacturer in the early 1990s. But in 1991-92, it began investing in branding—while export revenue was very strong, it started investing in retail, an area it knew nothing about. There was no retail then, so we grew through agency/franchising. That was a change, a decision. Looking at Europe, production came to a certain point and stopped—those who invested in brands survived, but manufacturers disappeared. Turkey would go through the same bridge. That's why we made the decision that brand investment was essential, and in 1998, God willing, we acquired the brand.

In 2001, during that crisis—Turgut abiler, Ümit abiler, Mehmet abiler here remember it well. There was a major crisis, and we made a decision: we would transition from wholesale/franchising to retail. We decided to close wholesale and grow through retail because we foresaw franchising wouldn't work. It was another difficult decision—we reduced the company's $80 million revenue to $15 million and started again. The structure, organization, and everything changed. Manufacturing and wholesale combined into retail, a completely different field. Then, thankfully, shopping mall investments started in 2002-03. Turkey's retail grew with shopping malls because street retail was very difficult—wrong physical structures and expensive rents. In 2010, having reached a certain scale in Turkey, we said we must go international. Because our vision was to be among Europe's top three fashion brands. We had tried in '97-'98 and gotten beaten—we realized if you can't compete at home, going abroad is pointless. First clean your own front yard. We targeted 2011, and in 2010 international expansion began. We started not in saturated markets but in developing regions—the Balkans, Middle East, Central Asia, Russia—target countries. We were right. If we hadn't entered those countries, it would have been harder to enter later. Today, LC Waikiki is market leader in 25 countries. We applied Turkey's experience to international markets. We don't have stores in the UK, France, or Germany. We had a Germany experience about 10 years ago but couldn't succeed—we weren't ready with collection, pricing, IT, or technology. But in the next three years, we have a target to open in the UK and France. We want to be among the top three fashion brands. Currently we're in Europe's top five. In 3-4 years, we hope to realize this vision. All plans and programs are aligned for this.

Change is truly very difficult. Let me share an eagle example that illustrates this—a memorable story about transformation. When an eagle reaches 20 years old, its talons harden and it can't catch prey. Its beak also changes and it can't hunt. Its feathers fall out. The eagle must decide: either change or die from inability to hunt. The eagles that choose change fly to a high rocky cliff and bring food that lasts six months. The transformation takes six months. First, it knocks its beak against the rock until it falls off. Then it waits for the beak to heal. With the healed beak, it pulls out its talons. It waits for the talons to heal. Then with new talons, it plucks its feathers. The eagle is reborn and lives another 20 years. If companies don't make this painful change—if LC Waikiki had continued as a manufacturer, saying 'franchising is fine, no rent, no staff costs, no electricity bills'—you would have invited me here as a guest someday, but that would be all. Without those changes in the past, or without going international in 2010, perhaps during the pandemic—Turkey shut down, but 20-30 of our 60 countries didn't, and the cash they generated kept the company going. The balance was maintained through diversifying into different baskets.

LC Waikiki is active in 5 continents, 60 countries, with physical stores. E-commerce reaches over 70 countries. Last year's exports were $1.25 billion. Total revenue closed at $5.25 billion. Approximately 40% is international, 60% is Turkey. We provide 55,000 jobs—retail company only, excluding production firms. This year's target is 15% growth in dollars. We're targeting $6 billion in revenue for 2025. We continue opening stores. We have logistics investments in three regions: Esenyurt, Yalova, and Aksaray. We also completed logistics investment in Kazakhstan. We established LCW Digital—serious AI-related work continues there. We'll continue opening stores, entering new countries, and investing. We'll keep growing efficient stores. I hope we'll hit our budgeted target for 2025.

There is contraction in the sector because clothing isn't the first thing consumers prioritize—it ranks around 24th on their list. Consumers first pay rent, electricity, natural gas, school fees, groceries—these are necessities. Clothing isn't like that. They clear those first. Also, tourism isn't contributing as much as before. The lira being overvalued and the composition of tourism not being what we desire means it's not providing sufficient support. Despite all this, LC Waikiki still has growth targets in both units and dollar terms. We'll achieve this growth through new stores, expanding existing stores—what we call ELFEL growth—and e-commerce growth. The plan and targets are set accordingly.

Thank you. This is truly a wonderful piece. Thank you very much.