Taipei Times: Tesco Taiwan is going to open its first store in Taipei this month, is there anything special you plan to bring to Taipei customers?
David Orchard-Smith: Tesco will bring a brand new city format to Taipei. This will be a new international retailing standard for the sophisticated customers of Taipei City. Tesco will offer the best customer service, top quality fresh foods, and competitive prices on a massive range. We aim to be the most desirable store in Taipei city. Besides the Taipei store, Tesco has 3 stores of hypermarket format in Taoyuan and Tainan. We serve 120,000 families a week and have over 300 mall tenants.
PHOTO: GEORGE TSORNG, TAIPEI TIMES
Taipei Times: Is this a sign that Tesco will focus more on running smaller-scale hypermarkets in Taiwan?
Orchard-Smith: The Taipei store is tailor-made for Taipei customers. It's not about the scale; it's about the customers and the size of the site. That's how Tesco works globally to create a range of store formats to suit our customers and catchments. There are eight current Tesco formats available internationally. We will continue to concentrate on delivering the best value for customers in all formats and all markets.
Taipei Times: What took you so long to set up a store in Taipei?
Orchard-Smith: Good locations for customers are the key to success for a retailer. It is not easy to get suitable sites in Taipei. We believe our new Taipei store will be one of the best sites in the city. We are committed to further development and are working with the Taipei City Office, the European Chamber of Commerce and the Ministry of Economic Affairs to try to get more land made available for commercial [use] in Taipei.
Taipei Times: In February Dutch-based cash-and-carry wholesaler Makro shut down all six of its Taiwan stores and pulled out of the market. Is this an indicator the local hypermarket sector is nearly saturated?
Orchard-Smith: Today's consumer demands much higher retailing standards. Tesco delivers these consistently, Makro could not match these exacting standards. Our customers tell us they want a modern and comfortable shopping environment, great service, available range, no queues at the checkout, and above all, competitive prices. The market is changing, as in all industries only the strong and the innovative who listen to their customers and deliver their needs will survive.
Taipei Times: One retail market analyst said with Taiwan's limited space, only about three hypermarket players can ultimately survive. Currently in terms of store numbers, Tesco lags far behind its rivals. Carrefour, RT-Mart and Far Eastern Geant Co, so what are the competitive edges Tesco has to secure its survival and development in the local market?
Orchard-Smith: Scale is certainly important and we are progressing our development plans. What is important for us is being No. 1 everywhere we open. We certainly have achieved this in our current locations in Tainan, Chungli and Taoyuan and against tough competition. Customers shopping with us are returning time and time again, because we exceed their expectations and that is what I want -- delighted customers through our doors.
Taipei Times: Tesco entered Taiwan several years later than most competitors. Has this been a major disadvantage to your local development?
Orchard-Smith: Being the first is not always the best, take Makro for example. For Tesco, the UK core business has been our solid platform. We started our international expansion in 1997. Currently we dominate the competition in seven out of the nine countries we operate in worldwide.
Tesco has become number one in Thailand in four years and number two in Korea.
We are making good progress in Taiwan's different market environments and achieving all our targets. We are strong in Asia and will continue to grow.
Taipei Times: Tesco has linked up with Samsung Electronics Co in Korea and with the Lotus Group in Thailand. Are you also interested in looking for partners in Taiwan?
Orchard-Smith: We were fortunate in Korea and Thailand to find like-minded businesses to work with. This has been very successful in the development of Tesco in Asia. In Taiwan like-minded partners were not forthcoming. We chose to regard our landlords and suppliers as partners to help us through the early days of set up. We were very fortunate to sign a memorandum of understanding with the MOEA last year. This and our relationship with the Taipei City Office has been a significant boost to doing business here. I would say that Tesco already has great partners here in the country.
Taipei Times: You mentioned that when Tesco entered South Korea, it was necessary to cooperate with Samsung because most Koreans are very loyal to national brands. Is the situation similar in Taiwan?
Orchard-Smith: Taiwanese are very open to international brands. They want to learn English, and they want to become more international. In the Tesco Tainan store, hundreds of school children visit us to take English lessons with bilingual product labels or service posters. Taiwanese are very open to new formats, tastes and styles.
It's a great country. In our Taipei store we have introduced more international lines and even more UK Tesco own-brand lines.
There will be 600 own-brand lines by the end of this year. Our customers tell us they appreciate our international range and Tesco own-brand products because of the excellent quality and price.
Taipei Times: How much is Tesco Taiwan expected to generate in sales this year and when does the company expect to break even?
Orchard-Smith: Any sales figures would be stated by Tesco UK on an annual basis. Last year the Tesco group sales were ?28.6 billion, generating a growth of 11.5 percent compared to the previous year.
And I can give you a rough idea about our business in Taiwan: we have created a sales growth of 50 percent compared to last year and doubled the staff. The UK board is very please with our business here so far. Tesco has invested NT$4 billion in Taiwan and we are making significant progress.
Our performance is exceeding the expectations of the group and development will continue as a result of this.
Taipei Times: When will Tesco set up a store in China?
Orchard-Smith: Tesco has had a team in China for two years now. We are talking to people, but it's not yet time to say anything.
There are many retailers in China but not many profitable ones. It is so easy to go into a country and lose money. But Tesco will go into China when the right opportunity arises.
Taipei Times: Do we expect to see another new Tesco store next year?
Orchard-Smith: A Tesco store takes around 18 months to construct. These last two years we have slowed down site development, as have other hypermarket operators.
Tesco currently has several memoranda of understanding already agreed, and I am sure we will be able to announce some good news to you in the near future.
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