Market analysis and financial model of the transaction: where to start doing business with Turkiye

Imports of goods from Turkiye in 2023 increased by 60%, and the country ranks second in Russia in terms of total imports of goods. In 2024, the partnership between the countries continues to develop. Entrepreneurs are discovering the potential of the Turkish market, and counterparties are producing goods that are relevant to the Russian consumer.

Market analysis and financial model of the transaction: where to start doing business with Turkiye

Choose a niche and analyze it

We mainly receive household chemicals, machinery, equipment, leather goods, textiles, clothing, furniture, and home accessories from Turkiye. To decide on the goods you want to import, you need to research the queries of future buyers using search engines.

For example, clients come to us for various equipment: metalworking, agricultural machinery, rubber products and much more. We select keywords related to a specific niche and study, using Yandex Wordstat and Google Trends, which customer queries are the most popular.

After this, we recommend looking at the marketplaces: Wildberries, Ozon, Amazon, eBay, Alibaba, which products are in demand and how much they cost. Pay attention to the seller ratings, customer reviews and answer your questions:

  1. Does the product meet customer expectations? If not, will you, as a future seller of such a product, be able to eliminate the shortcomings by talking with suppliers?
  2. Are customers satisfied with support and warranty service? Will you be able to provide them the same or better quality?
  3. What packaging is the product delivered in? How “selling” is she? and pleasant?

Also look at competitors’ websites, social networks and online stores. Compare their range and prices with prospective suppliers from Turkiye. This way you can assess your competitive advantages and determine the optimal prices for your products.

Draw up technical specifications

European suppliers do exactly according to the technical specifications. The Turks are for a human approach. They value flexibility and the ability to meet in a meeting. Business here — it's not just about business. Sometimes they may offer a product with slightly different characteristics: for example, equipment with less power than you specified in the terms of reference. It is important here to keep communication under control, not to prolong discussions and to clearly set boundaries. If the characteristics that you indicated are fundamentally important to you, then you need to immediately politely communicate this.

Prepare a detailed description of the requirements for the product:

  • characteristics: material, weight, dimensions, technical and other specifications, and also write down the requirements for capacity, power, speed;
  • visualization: shape, size, color. Specify color and use specific terms to describe design details, if any;
  • Photos or illustrations to help suppliers better understand what the product should look like. This will help avoid inaccuracies during production;
  • planned price. Limit your budget: You can specify a range or a fixed price. Please indicate whether shipping and duty calculations are required. The Turkish lira constantly changes its exchange rate, so it is better to count everything in euros;
  • shipment schedule or frequency of deliveries. Please ensure that deadlines do not coincide with national or religious holidays. For example, the Muslim holiday Eid al-Fitr takes place in July, so check the exact dates and allow an extra week.

Advice Not everyone knows that you can bargain with the Turks. But it is worth considering that the lower the price, the lower the quality. You can ask for a discount, but then it is better to ask how this will affect the quality. If you have good relationships with suppliers, then they are almost always ready to reduce the price by 10%, since when registering an export declaration they issue a 20% VAT refund.

Practical example. One day a client contacted us. He brought a tag from a well-known Russian clothing brand, where the manufacturer was indicated (according to labeling rules, this is mandatory), with a request to purchase a batch of the same clothes from the factory. The client did not take into account that a product that is produced for one client will not be produced for another client, unless there is a special agreement on the basis of which the manufacturer can sell a product developed for one client to others.

Find suppliers

First option: go to specialized exhibitions and forums in Turkiye and Russia. Exhibitions in various fields are often held in Istanbul, Antalya, Izmir, and Gaziantep. Here you can establish contacts directly with manufacturers and company representatives and discuss details in person. Ask to see the production or office if it is a trading company. Other forums are organized jointly and with the support of the Chamber of Commerce and Industry of the Russian Federation and Turkiye, the Russian-Turkish working group at the Russian Union of Industrialists and Entrepreneurs.

In Turkiye, networking and personal connections are valued. You can find a potential partner on your own and directly, but it is better if a mutual friend introduces you. Turks love informal communication, so it is best to find out in advance the cultural characteristics of the country, the latest news and events. This will make it easier to carry on a conversation.

Tell us about yourself and your business: especially if it is family-owned or has some interesting history. There are many family companies in Turkiye, so the Turkish partner will want to listen to the emotional component first, and then — benefits and other dry facts.

Take a Turkish translator with you, even if you and your potential partner speak English. You will be better remembered if the acquaintance takes place in your native language.

Second option: delegate the search to an outsourcing company. Suitable for those who do not want to waste time searching on their own. The staff understands the Turkish mentality and speaks Turkish. The company can be located both in Russia and Turkiye, if it is convenient for you to fly to them if necessary.

To find such a company, turn first to other entrepreneurs: your friends or those you find on business forums. Since the import market is growing, surely someone will be able to recommend a trusted company. If there are none, search the Internet, look at sites and reviews.

There are companies that specialize only in Turkiye, and there are those in several countries. Given equal data, it is better to give preference to a highly specialized company. Look at the history on the Rusprofile website: at a minimum, you should make sure that the company did not open yesterday.

Ask for cases and contacts of previous clients so you can talk to someone and find out how the company works.

Any outsourcing company that has nothing to hide will share information without any problems.

It is better to conclude contractual relations with the supplier through a Russian intermediary company. It will bear all risks under the Turkish supplier's warranty obligations. For example, chain stores do not always purchase goods directly. They often work through a technical importer.

Information on the intermediary company must be requested from the Chamber of Commerce and Industry (Chamber of Commerce and Industry) or the Union of Small and Medium Businesses in Russia. Litigation between two Russian companies is easier than between a Russian and a Turkish one, so many work through an intermediary.

Check the reliability of the supplier

Before concluding a transaction, it is important to make sure that the supplier is reliable, even if it goes through intermediaries. This will reduce problems with product quality and cooperation. Turkish services are not very popular. Live communication and meeting people at exhibitions works better. Things to check:

Is the supplier the final manufacturer? It is better to choose a manufacturer supplier, because this way there is a high probability of getting the product at a lower price and of better quality.

Is there a full package of documents: certificates of quality and conformity, declarations of conformity for goods, export license, patents (if available) and other documents. If there are no documents or the supplier does not provide them under various pretexts, it is better not to work with him.

What market does it produce products for: domestic, EU, Russian Federation. This way you will understand whether the product will meet the requirements of our market. For example, European winter jackets are not suitable for the Russian winter. You need to take this into account and carefully review the characteristics.

Maximum and minimum purchase volumes, the ability to order samples, etc. Each supplier himself determines what the minimum batch volume will be. Sometimes this can be a whole container of goods of the same article. This may be suitable for a large hypermarket, for a novice entrepreneur or a smaller store — No. Purchase volumes are always discussed and known in advance. If they don't fit, you need to look further. With samples the situation is different: suppliers are always ready to send them. And if for some reason they refuse, it’s better to look further.

Do the quality of the product and technical characteristics meet the required parameters? To make sure that the quality of the product meets your expectations, you need to come to the production site and check the product or send your representative who will do this for you. p>

Amount of prepayment and breakdown of payments — 30 / 70 or 50 / 50. This is a standard condition: when a product needs to be produced, many work according to exactly this scheme. If the goods are already ready, then 100% prepayment. Be wary of suppliers who require full advance payment for unfinished goods or offer other non-standard terms.

Calculate the financial model

For simplicity, you can use services, for example, "Alta-Soft" or Digital Foreign Economic Activity. The final cost of a transaction with Turkiye consists of the cost of the goods plus 30-40% for other expenses. What needs to be calculated:

  • product cost;
  • logistics: moving cargo to a consolidated warehouse, if the cargo is groupage. Delivery Turkiye-Russia, costs for warehousing, unloading the container and delivery to the client’s warehouse;
  • execution of permits, certificates, licenses, etc.;
  • customs clearance in Turkiye and Russia, customs duties, duties (if any) and VAT;
  • additional expenses: commissions of payment systems, insurance, payment for consulting services if necessary: a customs broker, a logistics specialist or an accountant with experience in working with foreign transactions.

Payments for Turkish goods produced in the country, as well as for the export of goods to Turkiye for the domestic market in 2023, took place without problems. However, at the beginning of 2024, due to new sanctions, some Turkish banks suspended operations with Russian companies. Until our countries find a final solution to resolve the situation, a quick alternative — make payments through international trading houses of third countries that are not subject to sanctions.

Trading house — a foreign trading company that carries out export-import operations, converts currencies and makes payments to suppliers.

The situation is similar with the parallel import of European goods. It must be paid through the Trading House. At the same time, it is important that the company is registered to a resident of another country and that the “Russian trace” does not appear in the transactions. Typically such companies charge a commission of 3-5%.

Conclude an agreement

Personal communication is important in Turkiye. By meeting in person, you can negotiate more favorable terms for cooperation. It is better to send your representative than to negotiate a deal via video conference.

Turks value moments such as a meeting at the airport or an informal dinner after business negotiations. Refusal may be perceived as a personal insult. If you are committed to long-term cooperation and discussion of discounts, accept such invitations.

Turkish culture tends to take its time, so negotiations may take much longer than expected and involve several rounds of discussion and decision making.

Turks do not make summaries after a meeting, so record all agreements yourself and ask your lawyer to include decisions in the contract. All obligations must be recorded in the contract, because oral agreements may not be observed.

When concluding a contract, it is better to entrust this to an international law lawyer who knows Turkish. Such a specialist may be in an outsourcing company with which you are already working. Or you can find a private lawyer through forums.

3/6/24
Ekaterina Kizevich, General Director of Atvira company, foreign trade expert practitioner
Views: 127
Source: RB.RU portal