Turkish Jewelers' Target: To Capture Italy's Most Important Advantage Through Branding

According to İnan Altınbaş, president of the Istanbul Precious Minerals and Jewelry Exporters’ Association (İDMMİB), which aims for 25% growth in the next year, “My biggest expectation is for 2010 and after. I believe that growth will be at its lowest in 2009 and that between 2010-2012 there will be an explosion.”

In 2007, the American jewelry and precious stones industry (6-digit NAICS code 339914) made $1.7 billion worth of imports from 104 countries. The American market reached a sum of $2.3 billion in 2007. It is expected that Turkey’s jewelry exports to the American market will reach a total of $200 million worth of exports.

What are the sector’s targets for its 10-year projections?
In the past 15 years, by showing itself to be high level, our jewelry sector has made an important place for itself in the world. In the production of gold jewelry in particular, we are in the position of being the country with the largest share in the marketplace after Italy. There is also a rapid growth in the production of jewelry containing diamonds and precious stones, which is tied to increasing demand.

Looking at the period ahead of us, it’s clear that we are not fortunate enough to have competition based on cheap inputs.  This is because our in our sector more than 80% of the factors determining the cost are based on import inputs. As for labor costs, which are as important as technology in production, we have almost caught up with European standards.

For now, the main criteria in our exports is the amount of labor that goes into the product. As long as we do not change this, because of rising labor costs there’s no doubt that we will feel increasing pressure to sell more merchandise that requires less labor to produce.

For this reason, the future of our sector is closely connected to its ability to rapidly transform itself in order to continue accelerating. Put another way, the sector is facing a need to move into a higher class by adding to its accumulated past and advantages.  

What needs to be done in order to achieve this?

It is of vital importance to reach the necessary maturity in the areas of design, product development, logistics, marketing, and customer service in order to achieve a sustainable competitive power.

The process of branding plays an important role in our ability to succeed in these areas. This is the new goal for our country in the field of jewelry. Branding, by making ourselves different from our competitors in terms of design, production, service and communication, is a very important step in gaining customer preference. In the period ahead, the force propelling our exports is going to be our branding.  

What benefits will branding bring to the sector?

If we can succeed in this as a sector, we aim to capture Italy’s most important advantage. When we succeed in this, our production and export totals will increase much faster than our exports.

As a sector, we have a goal of becoming the global leader by reaching exports of $10 billion in 10 years. In the period ahead, the increase of retail stores abroad, tourism sales, and the suitcase trade, which still accounts for a significant portion, will all have an important share in this.

While this is a very ambitious target, it will become reachable with sectoral transformations and with the development projects we are going to begin. We know that nothing can be obtained without certain costs.

The latest crisis will cause consumers to spend less. How will products in the luxury-consumption category, like jewelry, be affected by this crisis?

Among luxury consumer goods, we can say that jewelry is the only thing that doesn’t lose value after it’s bought. For example, ready-made clothing, accessories, and electronic products, which become worn out and go out of style, quickly lose their value and there is almost no gain to be had in reselling them. For that reason, during economic crises the demand for that type of product decreases, for people have less of what is called “disposable money” that can be spent wastefully. But jewelry, because it’s made of precious metals and stones, has a special value as a form of investment, along with its esthetic qualities.

For this reason, in the face of the psychological and social depression that comes during times of crisis, there is a strong probability that people will be inclined towards rewarding themselves and that rather than buying other products, they will buy jewelry as gifts that are lasting and do not lose their value. Buying a present of jewelry for family members is more appealing because it will remain as something with value that can be later put towards the family budget if money is needed.

Therefore, I am not of the opinion that our sector will be affected as negatively as other luxury and consumer sectors.

There are many Turkish companies now active in the American market. Because of problems stemming from competition and differences in the markets, some of them have had to close their offices and return to Turkey. Do you have a general briefing given by your association, or any advice that you would give companies that are starting to do business in or export products to the U.S.? Has an association of the strongest Turkish exporters considered opening a similar sort of information or advertising office in the U.S.?

As you know, on its side the U.S. applies its own Generalized System of Preferences (GSP) towards developing and underdeveloped countries. The gold production sector in our country benefits from this system as it allows the possibility of importing goods into the U.S. without customs fees. However, at certain points the U.S. removes from this system countries that have passed the criteria that it has set. For example, during a reexamination period in 2007, it was decided that gold products in the 71131950 GTİP category would be removed from this system as of July 2008. As a association, we organized educational seminars for our exporters so that they could make better use of this vital system, and those seminars will be continued.

Moreover, in 2008 our association, as a national organization of exporters, took part in some of the most prestigious jewelry fairs, including the JCK Show in Las Vegas, the Hong Kong Jewelry and Watch Fair, and the Macau Jewelry and Watch Fair. Firms in the sector were educated in design with the goal of strengthening their competitive edge.

The question of our association opening an office in the U.S. is one that will be evaluated in terms of the demand in this area. Certainly our association will use all the possibilities that it has to help our sector.

Does the high competition between firms doing business abroad weaken the prestige of Turkish products in the market? What should be done to prevent this?

The main reason for this competition is that we used to compete in a very narrow field. And, after all, competition among like firms is the natural outcome of trying to use cheap labor to get a foothold in the market. As I said earlier, by creating advantages for continued activities and high yields, our goal is to develop ways for Turkish companies to coexist and to complete each other as partners, rather than as competitors.  

As an association it is not possible for us to apply commands by force. What needs to be done and what we are focusing on is to equip firms with the weapons to protect themselves from debilitating price competition.

Will the U.S. first of all change place in your list of markets due to the crisis? Will imports go into a different expansion because of the crisis?

Even in the worst scenario, the U.S. is the world’s largest market for gold and diamonds. The short-term stagnation and shrinking will not be enough to change this fact. However, Middle Eastern companies do have an edge in times like this when the market turns towards lower caret and lighter products.
For that reason we can send what are called “price point” cheap products to the upper-middle segment and make up for our losses in the lower market. In the end the U.S. market is not one that is entered with a short-term approach. Whatever the conditions are, it’s a market that we will remain in long-term by adapting.

Are any of your member companies thinking of production in America, getting rid of exports all together and deciding to be part of domestic market?

In our sector, there are many companies wanting to bring the production experience that they have gained in our country to other countries and there are entrepreneurs that have already started this. The same thing is true for the U.S. You should not doubt that there will be Turkish firms that will carry out production under the necessary and appropriate conditions there. Furthermore, the owners of many small and medium-sized businesses that are in production in the U.S. have Anatolian roots.

Gülaylar, Atasay, and Altınbaş are among the first Turkish jewelry companies that come to mind in the U.S. While there’s a ruthless race to open stores in Turkey, in the U.S. in particular companies act more carefully on the issue of opening stores. What are the reasons for this?  

The reason for this is that most Turkish companies are not yet strong enough to provide merchandise to big distributors in the U.S. on a large scale, and there is not enough American appreciation of Turkish jewelry. In a meeting we had, the WGC president said that it was thought by American consumers that all of the gold jewelry in the country had come from Italy. In such a big market as the U.S., rather than being dreamers and adventurers, it’s more correct to take action by considering the consumers’ brand sensitivity. For this reason, not counting individual enterprises, an option that could be considered by Turkish jewelry stores is to buy existing chains of stores in the U.S., particularly in the crisis environment in which we find ourselves.

What are your expectations for exports in terms of numbers to the U.S. market for the end of 2008 and the year 2009?

For 2008, it appears that the U.S. has given its place to the UAE. By the end of the year we will have succeeded in reaching exports of $200 million. In the next year, if we consider the existing financial crisis, we can aim for an increase of 25%. My biggest expectation is for 2010 and after. I believe that growth will be at its lowest in 2009 and that between 2010-2012 there will be an explosion. Our main preparations should be for that period. The crisis period presents us with a test environment in which we can determine our shortcomings.