Turkey, the legendary land of Roman emperors and Muslim sultans, is once again the center of a thriving gold jewelry export industry that some experts believe will rival Italy’s within 10 years. The country’s current specialty is creating European designs at lower cost. But forward-thinking Turkish manufacturers foresee competitive challenges and are looking for ways tointegrate their country’s long history of jewelry design into pieces that are also uniquely modern.
Istanbul, the center of Turkey’s modern jewelry industry, was an international trading mecca for gold and precious gems for thousands of years. Long before anyone dreamed of Fifth Ave., Bond St. or the Fabourg St. Honoré, Turkish jewelers were selling their wares in Istanbul’s exotic Grand Bazaar.
While the tradition of gold jewelry in Turkey dates back to the ancient civilizations that lived there, its modern industry has flourished only since 1983, when the economy opened to international trade and the Turkish government began to encourage and subsidize export manufacturing. With its low labor costs and status as a protected nation under the Generalized System of Preferences, Turkey offers a prime price advantage over Italy, Germany and France, particularly for labor-intensive goods. This combination has gained Turkish manufacturers a strong foot-hold in the department store and jewelry chain store market in the U.S.
The Turkish jewelry industry is expanding exponentially, and its goal is to capture even more U.S. jewelry-importing dollars. “Twenty years ago, you didn’t have factories with 50 workers,” says Rasit Hosgor, president of Arpas, one of the country’s largest jewelry manufacturers. “Factories had maybe 10 or 20 workers, and there was hardly any modern technology. Production was done using traditional and often primitive skills.”
That’s no wonder. Mehmet Uca, managing director of Atasay Gold, says that before 1980, the country’s economy was closed, almost socialist. But the oil price crises of the 1970s wreaked havoc, and a military coup in 1980 caused the government to integrate trade policies with world commerce. In 1983, a civilian government took over and continued those trade policies.
Today, Turkish jewelry companies have developed into major exporters that have carefully studied U.S. tastes and needs. The country has a thriving jewelry trade fair each March in Istanbul. More than 300 companies exhibit in 12,960 square yards, catering to foreign buyers and the burgeoning domestic market.
At the moment, the bulk of Turkish production is devoted to creating European-style gold jewelry (mostly in an Italian vein, with some German and French influences) at lower cost. While manufacturers stress they won’t replicate a patented design, they freely admit to copying general styles and themes while making enough adjustments in design to keep it legal. Though some manufacturers make gemset designs or intricate designer pieces, the industry’s strength lies in creating the kind of gold jewelry American women like to wear every day. The particular advantage of Turkish jewelry, say manufacturers, is that buyers can get handfinished or fully handmade jewelry for the price of a machine-made piece.
But forward-thinking Turkish manufacturers realize that eventually others will figure out how to make the same designs better, cheaper or faster. Murat Akman, manager of the World Gold Council in Turkey, predicts this “eventually” will be within 20 years – the cost savings on labor won’t be enough anymore, and much of this kind of work will shift to countries with cheaper labor such as India and Asia.
At that time, Turkey’s rich cultural heritage will be its saving grace, Akman says. Gold jewelry production in Turkey includes influences from the Greeks, Romans, Assyrians, Ottomans, Mongols, Hittites, Anatolians and other ancient societies. Many of the ancient-inspired motifs in today’s designer jewelry are derived from Byzantine Empire jewelry. (The Byzantine era stretched from the establishment of Constantinople – today’s Istanbul – in A.D. 330 as the new capital of the Roman empire until the 15th century, when the Ottoman empire transformed the city into a center of Islam.)
Designers are looking back to that era for inspiration. “We’re looking for modern design with a sense of our cultural history,” says Akman. “These kinds of lines do exist, where companies are using cultural ties to build a new collection, but a sense of design is only about five years old.”
WGC has developed several Turkish design contests and published two Turkish jewelry trend books to help develop the concepts of original design and the skills of designers.
Growing pains: Though its low labor costs give Turkey a great advantage in making handmade or other labor-intensive jewelry, manufacturers must cope with a lack of support services. Because the country has virtually no domestic equipment manufacturers or ready-made findings, all equipment must be imported, and workers must be trained to run it. As a result, Turkish manufacturers rely on their own devices.
While a few companies do produce great quantities of chain, many find it doesn’t pay to compete with large Italian factories that churn out yards of it every few hours. Most Turkish factories have invested in such machinery as casting ovens, stampato presses and polishing wheels, where the assembly and finishing of pieces is done by hand.
An average worker in a jewelry factory earns the equivalent of US$500 to $750 per month, depending on bench skills. Apprentices, many of whom start at age 12, earn less. Shop foremen or other highly skilled and advanced workers may earn $1,000 to $1,500 per month.
Turkish manufacturers have to be educators as well as producers. There are some jewelry classes at one or two technical institutions, but the bulk of training is done on the job. All the manufacturing firms JCK visited train their own workers, especially if they’re hired after they’ve finished the five years of primary school required by law. There is a system, somewhat along the lines of a U.S. vocational-technical school, that pairs trade apprenticeship with time allotted for general schooling. Some jewelry factories employ women, but usually in the office and only rarely in the shop. Designers and top-level fabricators are usually trained in Italy, Germany, France or the U.S.
If Turkey becomes a full-fledged member of the European Union – it’s in the process – Turkish nationals will be able to seek employment anywhere in the E.U. and E.U. nationals could work in Turkey. Given Turkey’s low wages, this could result in an exodus of workers seeking better wages, says Uca of Atasay Gold. But only the better-educated and qualified workers could realistically expect to find employment abroad. At the same time, an influx of E.U. capital into Turkey to take advantage of the labor pool could bring economic growth. Eventually, wages will have to adjust, but Uca says it will be a long-term growth, over 40 or 50 years. “Italy’s been in the E.U. for a long time and wages in southern Italy are still way below what they are in Germany,” he says. Turkey is part of the Custom Union, so its exports to and imports from countries in the E.U. are not taxed. (Acceptance into the Custom Union is the first step toward E.U. membership.)
Price and politics: Turkey also faces other challenges to keeping its price advantage. The U.S. Generalized System of Preferences, under which Turkish imports enjoy a tax-exempt status, must be renewed each year, but renewal is not guaranteed. The current GSP status expires May 31. At press time, U.S. government officials would not say whether Turkey’s GSP status will be in question when it comes up for renewal. If the GSP status isn’t renewed, the tariffs would drive up prices 6%, making Turkish jewelry either less competitive for buyers or less profitable for manufacturers should they choose to absorb the cost themselves.
Uca suggests politics will play a large role in determining whether GSP status is retained. Turkey sits strategically between Europe and the Middle East. Though a largely Islamic nation, it is officially secular, democratic and a key U.S. ally in the volatile Middle East. However, it has shifted recently toward more fundamentalist Islam, a move that worries some U.S. officials (and some Turks). To the east, Turkey borders hostile fundamentalist states Iran and Iraq. Uca feels the U.S. may dangle the GSP status as an incentive for Turkey to maintain its neutral and secular stance.
The GSP status is responsible for a significant portion of the growth of Turkish gold exports to the U.S., say manufacturers. If it’s eliminated, companies may react by cutting costs or looking for more lucrative markets elsewhere. Hosgor of Arpas says certain goods would be particularly hard to sell in the U.S. if GSP status is eliminated, so his company would have to turn its focus back to the domestic market. Right now, Arpas exports between 60% to 65% of its production, with the U.S. being its primary market. The company, one of the first to export large quantities of Turkish jewelry to the U.S., hopes to work up to exporting almost 100% of its production.
Cutting costs is problematic. Because wages are low already, there’s little chance of bringing down these costs. With Turkey’s annual inflation rate at a whopping 80%, wages have to try to keep up. Some relief may be in sight from loosened gold credit and lending laws, but it’s not enough.
The obvious place to cut costs is to eliminate one layer of distribution. Turkish manufacturers adhere to a three-tier system (manufacturer to wholesaler/importer to retailer), and most say they have no intention of changing this structure and selling directly to retailers. The reason is pragmatic, say Turkish jewelry manufacturers Edip Akdemir of Dora and Mesut Magzalcioglu of Istor. Because all gold has to go to the Treasury Department to be assayed and signified that the karatage is accurate, it’s too much paperwork to sell a few pieces to one retailer. However, Akdemir says his company might consider selling to a retailer that buys the same kind of volume a wholesaler would.
The quickest way to profit from the three-tier distribution system, of course, is to own all tiers yourself. Vertical distribution is already common in Turkey and continues to gain strength. Many manufacturers have a wholesale division and at least one retail outlet. The retail operations are often in Istanbul’s famed Grand Bazaar, but some manufacturers have regular storefronts in the city, in tourist areas outside Istanbul or both. Arpas, for example, finds its two retail shops to be a good place for consumer test-marketing.
Domestically, says WGC, five companies have well-known brand names, but they don’t market by brand outside of Turkey. In the country, however, they’ve all participated in various ad campaigns with WGC.
Domestic Market: Turkey has anywhere between 7,000 and 40,000 jewelry retailers. The Ministry of Finance has registered 35,000 to 40,000 jewelry-selling shops, but it’s impossible to know how many are seasonal or not viable businesses.
Many retail companies export jewelry indirectly by selling to tourists, says Ida Cernis Gurel, director of Rotaforte, which produces the annual jewelry fair in Istanbul. Tourists flock to the Mediterranean and Anatolian regions of Turkey each summer, and many relish the chance to buy jewelry for far less than at home. Turkey’s lowest minimum gold karatage for domestic sale is 8k, but most is 14k or 22k. Benchmarks of 22k Turkish jewelry are filigree, granulation, circular and geometric forms, and flowers (traditional jewelry reflects Islamic prohibitions against depicting human or animal forms in art).
Some tourists are attracted to traditional high-karat looks, but most prefer European designs in 14k. In the domestic market, meanwhile, the karatage rule of thumb is changing with the times. Young women from lower classes are selling their traditional 22k jewelry to buy high-fashion, Western-style 14k pieces, says Ahmet Saydam of manufacturer Falez Kuyumculuk. This causes friction with their parents, who see 22k as security. Arpas’ Hosgor attributes much of the change to television (the number of channels multiplied and brought more U.S. films in the late 1980s) and tourism (fashionable Europeans find Turkey an attractive vacation spot). These factors introduced many U.S. and European styles to Turkey.
Turkish jewelry retailing is still relatively old-fashioned. One retail company, Gilan, has established a strong brand identity and luxury market niche, but most jewelry stores simply load up the showcases with as much product as possible and the owner serves as buyer, bookkeeper and sales executive.
The increase in global commerce has had its effect. As retailers see the success of stores such as Gilan and manufacturers see the worldwide demand for their product, Turkey’s jewelry industry looks toward a bright future. Considering that trade has always been an integral part of Turkish history, it’s not surprising the country would come as far as it has in only 13 years. It should surprise no one if Turkey does indeed take a place among the top jewelry-producing nations of the world quite soon.Turkish Design
“Modern design with a sense of cultural history” is how the World Gold Council’s representative in Turkey, Murat Akman, describes the country’s relatively new push toward contemporary design. Though the design movement is only about five years old, a number of companies have already achieved impressive results. Cetas, one of the companies focusing on contemporary designer jewelry, also employs historical techniques and perspectives in its designs. They’re used in a way that makes the jewelry contemporary and wearable, says Rober Tas, chief executive officer.
Shown here are some techniques handed down from ancient times that Cetas uses. They include woven bracelets, cut-out gold work, cabochon gem accents, chasing and other techniques. Cetas Jewellery, Nuruosmaniye Caddesi, No. 40/1, Cagaloglu, Istanbul, Turkey; (90-212) 512-2817, fax (90-212) 520-1767.
Designer Kevork Yuncul of Sa & Ma also draws on historical and cultural influences to create gold designs. In particular, note the granulation, gold weaving and braiding techniques, bezel settings and cabochon accents on the handwoven chains pictured here. Sa & Ma, Serefefendi So-kak, Agaoglu Carisi, No. 40/45, Nuruosmaniye, Istanbul, Turkey; (90-212) 513-4585, fax (90-212) 528-2770.Traveling To Turkey: Show Business & After-Show Pleasure
Istanbul ’97, the International Watch, Clock and Jewellery Fair, will be held March 6-9 in Istanbul. The fair, now in its 12th year, boasts 375 exhibitors and more than 20,000 visitors. Three-quarters of the exhibitors are Turkish and the rest hail from such countries as Italy, Switzerland, Hong Kong, France, England, Japan, Germany, Austria, Sweden and Thailand.
U.S. buyers will find many exhibitors geared to the export of fine jewelry. Turkey offers a strategic trade position with Russia and many republics of the former Soviet Union and also is building strong business relationships with emerging Eastern European countries.
Daily flights are available from all major European cities to the Ataturk airport in Istanbul. There’s one daily direct flight from New York City (Turkish Air’s U.S. frequent-flier partner is Northwest Airlines).
If you want to go to the fair immediately after landing, it’s held next door in the World Trade Center. If you want to freshen up first, there are several four- and five-star hotels near the fair site, plus many others in the center of the city. Package prices are available for show attendees.
Show services include interpreters, customs assistance and a professional business center with telephone, fax and consultation on the Turkish market. The staff of Rotaforte, show organizers, is knowledgeable and helpful.
On your off hours, the center of Istanbul is a short ride away for dining, entertainment, shopping and touring. Taxis are plentiful in Istanbul, and fares are low. The Turkish lira is weak against most major currencies, making Turkey an excellent value for visitors. Major historical sights in Istanbul include the Topkapi Palace Museum with an exquisite and extravagant jewel collection, the Dolmabahce Palace, the Blue Mosque, St. Sophia church/mosque and, of course, the Grand Bazaar. The Akmerkez has won numerous international awards as a leading shopping center and boasts Vakko and Beyman, two luxury department stores. Particularly good values in Turkey include leather goods, textiles and rugs. Bargaining is expected in the Bazaar – 30% to 50% off can be negotiated; bargaining is not done in upscale shops.
Istanbul is a particularly trendy tourist destination in the wake of John F. Kennedy Jr. and Carolyn Bessette-Kennedy’s decision to honeymoon there this past fall. Despite this, the city remains unpretentious and friendly. (Do stop into the Ciragan Palace Hotel, where the Kennedys stayed; the restaurant is fabulous, the building – a former palace – is magnificent and the view is breathtaking.)
The Turks are famous for their hospitality, and with good reason – you will be offered tea or coffee almost everywhere you go, often even in stores. The city is generally safe; observe the usual precautions of a big city, particularly against pickpockets, but violent crime is relatively rare.
The food is excellent – beef and lamb are menu staples, but fish, chicken and vegetarian dishes are plentiful also. Flavors are savory rather than spicy, deliciously garlicky and herbed, but some dishes do have a slight kick. Some travel agents recommend drinking only bottled water, but this reporter drank tap water and suffered no ill effects. Finally, one word of warning: Istanbul has heavier air pollution than Americans are used to and almost everyone smokes.
For more information on Istanbul ’97, contact Ida Cernis Gurel, director of Rotaforte, at (90-212) 519-0719, (90-212) 519-2886 or (90-212) 519-3328; fax (90-212)513-3038. Add seven hours to Eastern time.Turkish Market Primed For Diamond Growth
While the bulk of the Turkish jewelry industry is devoted to gold, De Beers has been watching carefully. A Turkish Diamond Promotion Service and Diamond Information Center office opened in April 1994 and has campaigned vigorously to boost diamond jewelry sales. Diamond sales in Turkey total US$272 million annually, excluding sales to tourists. Of this, 47% comes from wedding- related purchases. (By comparison, U.S. diamond sales are $16.8 billion annually.)
Sebnem Karacasulu, head of the Istanbul office, says the bridal market is the biggest opportunity for diamond sales growth in Turkey. Weddings are already established as the most significant occasion for gifts, providing three opportunities: pre-engagement, engagement and wedding. De Beers promotes the idea of a diamond bridal set, which in Turkey means several pieces of matching jewelry, including earrings, a necklace, a ring or a brooch.
The traditional Turkish engagement ring has five or seven stones, like an anniversary band in the U.S. But De Beers sees a big potential market for selling diamond solitaire engagement rings, especially in the upper classes. Karacasulu says rather than abandon the multistone ring for one big stone, women simply wear both rings. “Turkish women like to wear jewelry and show off,” she says. “They will wear three diamond rings together so there’s a huge potential in that sector.”
Eighteen percent of all Turkish adults receive at least one piece of diamond jewelry as a wedding or engagement present, and in non-bridal jewelry there’s a strong tendency to buy diamonds among the young (ages 18-34) in the elite classes.
The tradition of diamonds does go back in Turkish history, says Karacasulu. In fact, several important diamonds are displayed in the world-famous Topkapi Palace Museum. She says the public will be able to accept diamonds as a symbol of love and romance, especially in urban areas. Rural areas, however, may never lose their affinity for gold, she concedes.
One segment of diamond jewelry unique to Turkey is rose-cut diamonds set in 22k gold. However, the Turkish DPS is not promoting this jewelry. This jewelry tends to appeal to tourists who want something distinctly Turkish, while DPS targets its promotions to the domestic market.
“Our research shows people don’t want to have many rose cuts – one is enough. But they want many brilliants,” says Karacasulu. DPS efforts include a consumer campaign on how to buy diamonds, another consumer campaign on identifying diamonds as gifts of love rather than financial investments, an intensive education program for store managers and a design contest.