BIM recently stated that the executive board were authorised to begin research work on the Iranian market to define its investment potential and the opening of a store. This is a business-as-usual venter for the Turkish retailer as it has not been shy of investing in politically volatile markets in the past - as illustrated with its entry of a post-Arab Spring Egypt.
Why Iran now?
Following almost ten years of UN sanctions on Iran, the announcement of UN resolution 2231 sets out a schedule for suspending and then lifting sanctions on the country. This resolution lights up the amber light for foreign direct investment on Iran, and such a market is also a likely candidate for BIM’s foreign expansion strategy.
Is Iran right for BIM?
The Turkish retailer defines its stores as a hard discounter that is perceived as so in Turkey since the large middle-income households’ strata view BIM’s prices as significantly affordable. This is a different case in Iran - as well as Egypt – because of the relatively and significantly lower middle-income share of household populations. There will be a significantly higher share of the Iran households that will not afford BIM’s prices.
Yet this format has been successful in Egypt regardless of the low share of value-seeking middle income households, like in Iran. BIM’s expansion here was fuelled by the market’s large population size in this market - largest in the region - accessing a large number seeking middle-income households. This would also apply to Iran considering it is the second most populated market in the Middle East, just above Turkey’s.
Who are they competing against?
BIM is further motivated by the lack of international retailers in Iran, with the sole presence of Majid Al Futtaim’s Carrefour franchise – although divested from MAF Holdings in 2013. Not much competition on the international retailer platform, but because of BIM’s price-led strategy it is most likely to face competition from local retailing companies and the traditional retailing sector.
The cherry on the cake here for BIM is a shared border and culture - to some extent - between Turkish and Iranian consumers when it comes to the cuisine. Flavours and produce preference are likely to overlap simplifying the category management process for BIM in Iran, as well as the sourcing task when it comes to grocery categories.
All in all, BIM’s interest in Iran is a likely move for the Turkish retailer, so watch this space.