Why have Trendyol and Hepsiburada been in the news
Since last summer, several Turkish tech companies have seen their valuations jump above the billion-dollar mark. Hepsiburada and Trendyol are two leading examples of this surge in Turkey’s tech sector.
In July, Turkey’s “Amazon,” Hepsiburada, floated on the Nasdaq for $3.9 billion and, Trendyol, the country’s leading e-commerce company, raised money from Alibaba and SoftBank at a valuation of $16.5bn. The latter is gearing up for an IPO in the next two years.
In a short period, Turkey has gone from a “no-go” zone for venture capitalists to an area of real focus on the back of several successful companies that includes – among many – Getir (a grocery delivery app) and game developers Peak Games and Dream Games.
What opportunity are Trendyol and Hepsiburada targeting?
Local Turkish e-commerce players have been able to grow, in part, due to a phenomenon whereby the largest global players such as Alibaba and Amazon struggle to enter emerging/frontier markets directly. Given the complexity players like Alibaba face in markets such as Turkey, the door has been left open for local companies to grow and eventually be acquired by the largest players or raise international capital via a strategic sale or IPO.
Although Turkey is one of the fastest-growing economies, achieving real annualised GDP growth of 5.2% from 2010 to 2020, this growth has come with significant volatility – particularly in its currency. Turkey is the second most populous country in Europe (84 million people), with an e-commerce market that has grown much faster than offline retail – growing at an annualised rate of 46.1% from 2015 to 2020. E-commerce penetration more than tripled during the same period, from 3.1% of the overall retail market in 2015 to 10.1% in 2020. This transition to online has been aided by high credit/debit card prevalence in the country (91%), relatively high-quality physical infrastructure, and the Covid-19 pandemic, which ushered in a step shift globally to online services.
Trendyol and Hepsiburada have ridden this wave of technological upgrading in Turkey. The success of these companies irrespective of economic volatility is further validation of Sturgeon’s thesis that companies profiting from efficiency gains – for example, the rise in e-commerce penetration – are more resilient than those solely dependent on high GDP growth. As with many other emerging and frontier markets, low e-commerce penetration suggests significant room for growth compared to penetration in other large markets such as South Korea at 35.8% and China at 27.3%.