Esem Spor makes a new beginning with unique partners, ambitions

An affiliate of the Cankurtaran Holding, Esem Spor was established in 1977. The company got started producing polyurethane soles and artificial leather for shoes and later switched to designing and producing shoes. It was the first Turkish athletic shoe producer and was a popular brand in the '80s. Esem brought the world-famous Adidas brand to Turkey in 1983, when they signed a 13-year distributorship deal with the company. However, financial problems in subsequent years led to a restructuring in the company and they nearly stopped operations during the 2001 crisis.

Having graduated as an industrial engineer, Akyıldız started his career in Esem Spor in 1994. He left due to a financial bottleneck in the company in 2004 and returned in 2009 after the company had been restructured. Esem inked deals with brands such as Slazenger, which has been designing, producing and marketing the brand's products since 1993. Although their agreement with the British brand will expire in 2013, Akyıldız says they expect to continue the partnership with Slazenger “for many more years.”

Esem returned to the market in 2009 and boasted a strong performance in a short time. The company increased its turnover by 51 percent in 2010, over 2009, bringing it to TL 11.5 million. Esem Spor expects to have a turnover of TL 20 million this year. It is the only sportswear company traded on the İstanbul Stock Exchage (İMKB).

“We have developed a unique partnership model with Slazenger and they were happy with this.” Akyıldız explains that Slazenger offers products for such certain sports, like tennis, but Esem Spor convinced the brand to switch the focus from shoes worn specifically to play sports to the more general sporty lifestyle footwear in Turkey. “This is why Turkish customers prefer everyday shoes; they have seen that this model works well and offered their new partners in new markets the same model,” he explains. Akyıldız says his company designs different models of shoes and other sports textile products for Slazenger. He says they expect to bring different global brands to Turkey in the middle run and have continued to conduct market research to this end.

Making mention of the restructuring process in the company, he said they conducted comprehensive market research before they could reenter the market. They decided to work with a strong and popular partner and keep their brand name Esem Spor. “So, we decided to sign a partnership deal with the sportswear chain Ayakkabı Dünyası. We had to make sure we made a strong comeback to the market because we had lost popularity in the years we remained outside the market.” Akyıldız says the retailer has the advantage of offering all products marketed by Esem Spor in all of their 38 stores across the country.

Esem has also opened stores with its own brand name and its first ever store was recently opened in İstanbul's Çekmeköy. “We need different sales channels where we could introduce all of our collections and we contemplated a separate concept for our stores, in addition to [the concept we have for] Ayakkabı Dünyası,” he says.

Shopping malls lack ideal planning

Akyıldız draws attention to some structural problems in the market. One of them is the ambiguous regulations related to shopping malls. Akyıldız says shopping malls in Turkey “spread incredibly fast” and that this deals a blow to relatively smaller producers and dealers -- which he says are critical in reaching out to a large customer base. “Retailers are stuck in the shopping malls and malls only allot space to large dealers; this hampers the business of small companies,” he explains, adding they would like to work with small dealers as well. “Because not everyone shops at malls, these small shops on the streets are still important for us to market our products. We need small dealers to deliver our products to a large customer base.” An increase in the number of shopping centers has not come without problems, some of which are a result of the lack of legislation to address them. Small Turkish retailers have in the past blamed shopping centers for their going bankrupt. The number of shopping malls in Turkey has increased from 160 in 2005 to 279 in the second quarter of this year. Considering that this number increases by an average of 25 percent each year, many predict that this number will reach 400 by 2013. The government is expected to address the issue; however, no solution has been reached thus far.

“There is room for chains offering diversified sports wear brands and there is demand for it,” Akyıldız says. He also notes that foreign companies are interested in the Turkish market. “There are some which have already entered and are growing rapidly. Deichmann is one of them. Foreign companies looking to invest in the Turkish sportswear retail market should keep the purchasing power of the average person in mind and should also know that there are strong local players awaiting them.”

A new fashion brought in pockets of KangaRoos

Esem Spor wanted to add a new global brand in addition to Slazenger to their portfolio and began working to this end in 2009. “We were looking for a brand with a unique, different story... Our market research continued for some time and we found KangaROOS,” he notes. They introduced KangaROOS to Turkish customers last year.

“KangaROOS have a unique story of its own; it was the first type of sports shoes with a pocket and became a legend in a short time. They are sold in 62 countries.” He explains the reason why they chose to undertake the distributorship of the brand. The KangaROOS shoes were created by American architect Bob Gamm, who designed them with a pocket to store his keys and money. This shoe type became very popular throughout the '80s.

He says the brand offered them new insights and they brought new styles to Turkey to attract the attention of many customers. As part of the deal with KangaROOS, Esem Spor has two options: they can either design their own shoes under the KangaROOS brand name or share designs with other dealers in 62 different countries' markets. “Some parts of the design are developed in Turkey, while others are developed in the UK and in Germany. Akyıldız says the designs created in Germany have a unique importance for Turkey since many Turks who live in Germany were introduced to this brand relatively earlier and told their relatives in Turkey about it. “We saw that Turks in Germany liked this brand and we guessed it would be popular in Turkey as well,” he says, adding that early customer feedbacks have been “positive.” There has been some odd results... Some of the customers associated the brand with Australia, which is the home of kangaroos. But we hope that product awareness will increase in the years to come,” he adds. In other words, the brand's reputation speaks for itself. The company expects this year to pocket TL 5 million from the sales of KangaRoos, which will be available in 100 different sales points by the end of this year.

Akyıldız says that a large portion of their shoes are produced in Asia, particularly in China which offers a price advantage. “The country attracts all the global brands with its well established supply industry. China has relatively better production quality and its services are cheaper when compared to other Asian markets,” he explains. Akyıldız asserts that the “made in China” label should not be a disadvantage for dealers. His remarks are important whilst there is a disappointment regarding the “cheap-jack” Chinese products in Turkish public opinion.

“We produce some of our shoes in Indonesia and Vietnam as well, but the quality of Chinese production is relatively higher and the negative images in Turkish customers' minds should change,” he adds. Despite his support for “made in China,” Akyıldız has some reservations. “I have been following the Chinese market closely for the past 13 years. There have been some changes in the country, however, to the disadvantage of the producers there. Labor and raw material costs are increasing rapidly,” he says, recalling that the per diem cost of recruiting one worker has increased from $60 to $250 over the past six years. But still he thinks the Chinese domination in markets is likely to continue in the months to come.

Turkish customers relatively more ‘conservative'

When comparing Turkish customers' preferences in sports wear with others in global markets, Akyıldız says Turkish customers are relatively more “conservative” when it comes to buying shoes.

“This trend can be analyzed in two different segments: male and female customer preferences. Male Turkish customers mostly prefer one single pair of shoes for multiple usage -- a very classic model. Female buyers are relatively less conservative and prefer different shoes as they follow fashion trends closely,” he explains. Research has found that a customer purchases an average of six or seven pairs of shoes per year in the EU and two of these fall under the category sports footwear. When looking at Turkey, each individual prefers to buy two pairs of shoes in one year.

Akyıldız says such customer preferences also affect the development of the Turkish sports footwear market. “The Turkish sportswear retail market has not reached maturity yet. We need to attain greater professionalism and more people should be encouraged to do sports,” he says. They plan to sign a deal with a new brand in the next two or three years. “We will focus on the customer base and concept when defining the new brand. It is hard to create a global shoe brand -- there is potential to do so,but we have to take the right steps. We need [research and development] R&D investments. As to the Turquality project, a state-initiated program that supports companies in generating worldwide brands, he said there is potential in the Turkish footwear industry but the sector lacks necessary R&D investment. “We are good in design for instance; however, it's not all that necessary to produce all products in Turkey,” he notes. Akyıldız around 75 percent of shoes in the world are produced in China, but global brands manage to keep their market value high and they are the real owners since they design the product. A product belongs to a country where it is created and designed not necessarily simply produced,” he emphasizes. Akyıldız says local producers should make use of the incentives offered by the government. “They could spend more money in R&D investments in order to create a more competitive market than the one that currently exists,” he notes.