Watsons targets discount niche

Hong Kong-based retailer Watsons has made a foray into the discount retail market by opening up a new store offering everything from daily necessities to toys on the cheap.

The new store, Big Deal, is located in Taipei's Hsimenting area and targets young consumers between the ages of 15 and 25.

Watsons opened the outlet in January but made no public statements associating the store with the Watsons chain. A company official said the the retailer was "testing the waters."

"Big Deal is a venture to try out some new ideas to see how the market reacts," said Gordon Reid, the managing director of Watson's Park'N Shop Ltd in Taiwan.

The company is planning a six-month trial run, he said.

Fearing consumers may confuse the brand images of Watsons and Big Deal, the company chose to market the new brand independently.

In late 2001, the retailer opened its first Big Deal shop in Hong Kong. It now operates two outlets there.

Rather than specializing in health and beauty aids, Big Deal offers toys and stationery, David Boynton, merchandising director of Watsons Taiwan.

Watsons, witnessing the success of several Japanese discount store chains such as Daiso Shop (大創百貨) and Sai Yu-kan (彩遊館), decided to also explore the niche market, Boynton said.

Consumers appear to favor discount stores.

"Last year's sales were NT$360 million, or more than a 20 percent increase over the previous year," said Wang Jui-liang (王瑞良), general manager of Sai Yu-Kan.

"We expect sales growth to expand within the next two years," he said.

Sai Yu-Kan has been in Taiwan since 2000, has 13 stores nationwide and sells over 50 percent of its products for only NT$39 a piece.

Wang said the business model has been popular in Japan for 25 years and has proven to be a success during slow economic times.

"Selling super-cheap products is profitable, especially when consumers are tightening their belts," he said.

The market can support about 300 discount outlets, Wang said.

More than 50 discount stores are scattered throughout the country, although most of them are located in the north, Wang said.

But at least one economist believes that this market is highly restricted.

"Since most products offered in discount stores are durable items such as kitchenware and stationery, consumers do not need to purchase such items often," said Kung Ming-hsing (龔明鑫), a director with the Taiwan Institute of Economic Research.

Consumers may shop at discount stores only two to three times a year, while stores selling fresh foods or toiletries can create regular consumer traffic, Kung said.