Rising Turkish Cities Offer Growing Urban Consumer Markets

Turkey features the third largest urban population in Western Europe, growing by an impressive average of 2.1% per year during 2007-2012. Istanbul, in turn, was the second most populous city in the region as of 2012, exceeded only by London. Second-tier Turkish cities are also on the rise. Altogether, this is increasing demand for urban living-related goods and services, as well as offering access to new considerable pools of consumers.

Per Capita Annual Disposable Income Growth in the Largest Turkish Cities, 2007-2012

Source: Euromonitor International

Note: Chart maps Turkish cities (with over one million inhabitants) in terms of population in 2012 and growth of per capita real annual disposable income over 2007-2012. Bubble area is proportional to per capita annual disposable income level in respective city in 2012, with its size provided in the bubble.

As is often the case in developing cities, many young Turks from rural areas are moving into metropolitan areas in search of better opportunities and lifestyles. Over 2007-2012, major Turkish cities, with over one million inhabitants each in 2012, saw their populations grow between 8% and 25% each, which is an impressive pace compared to other Western European metropolises. Turkish cities accounted for nine out of 10 of the fastest growing cities with over one million inhabitants in the region over 2007-2012.

Such notable population growth has a 2-sided impact on the development of Turkish metropolises. It has inevitably stimulated growth in the local consumer market, but rapidly multiplying residents require an adequate infrastructure and resources in order to translate into economic growth.

Increasing Consumer Spending Power

Over 2007-2012, major Turkish cities saw per capita real annual disposable incomes surge between 4% and 27% each, with the highest per capita income level being registered in Istanbul (US$11,200 in 2012) and Ankara (US$9,200). It has created expanding marketing opportunities, especially those related to goods and services targeted towards modern living in a city. For example, in Istanbul, growth in spending was strongest on education (52% increase in real consumer expenditure over 2007-2012), housing (36%), communications (28%) and leisure and recreation (28%).

Residents of large Turkish metropolises tend to lead wealthier lives as urban consumers have higher purchasing power than rural inhabitants. Consumer expenditure per household in Istanbul and Ankara has consistently been higher than the national level (US$36,700, US$31,800 and US$29,000, respectively, in 2012). Even though it is significantly less than the respective figure in London (US$59,800 in 2012), the gap between Turkish and developed Western European metropolises is gradually decreasing.

Economic Advantages and Challenges

Turkish economic policies, the customs union with the EU allowing particular goods to travel between the two entities without customs restrictions, EU accession negotiations and the resulting influx of Western European direct investment have enabled the country to emerge as an integrated production platform for European manufacturers. Istanbul is one of the most manufacturing-orientated cities in the world, and the share of its workforce employed in manufacturing is comparable only to major cities in China. Turkey’s rapid economic growth has encouraged major advances in infrastructure (including transport, utilities, hospitals, universities, etc) and public services as well as urban transformation and renewal in many Turkish cities.

Alongside positive effects, a rising population has created certain challenges for large Turkish cities. A high rate of migration is putting increasing pressure on limited resources, infrastructure and social services. In 2007, 36% of the total Turkish population (and 53% of the total urban population) lived in cities with over one million inhabitants, while five years later, those numbers had risen to exceed 40% and 57%, respectively. In some cases, the creation of new jobs has not been able to keep up with the persistently multiplying potential workers. In 2012, unemployment rates in Istanbul and Ankara stood at 11.3% and 9.6% of the economically active population, respectively, compared to a national level of 9.2%.