The nation's convenience store sector is expected to experience further consolidation in view of increasingly fierce competition, a report released by the Cabinet-level FTC said yesterday.
"There is still room for the convenience store business to grow," Chen Chi-yuan (陳紀元), vice chairman of the commission, said in the report. "Judging from the previous and ongoing expansion plans among the big players in the market, we believe further mergers or strategic alliances formed to increase market share can be expected."
As of the end of last year, there were 6,913 convenience stores nationwide. Among the stores, President Chain Store Corp (
This year, President has opened another 165 outlets, bringing the total to 3,352. FamilyMart added another 58 outlets and was expected to reach 1,400 stores by October, while Hi-Life has over 850 stores nationwide.
One recent example of consolidation in the sector occured early last month, when FamilyMart announced it was acquiring 43 convenience stores operating under the "Million" (
Convenience stores last year generated NT$121.3 billion in sales, an increase of 13.4 percent from the previous year, the report said. The commission said it will watch the sector closely for any unfair trade practices, such as the development of an oligopoly that could dominate the market in the future, it said.
Despite the industry's optimism, one market observer said there is simply no room for market growth.
"The nation's convenience store market is saturated," said Christine Wu (
Wu said the number of new store openings is decreasing yearly, though many companies are still seeking to start franchises of their chains. The growth rate for convenience stores has continued to slide from a peak of 25.38 percent in 1999 to 11.31 percent in 2001 and 9.45 percent last year, according to the report.
The daily number of customers per outlet also rose slightly from 771 in 2001 to 776 last year, while average spending per customer barely grew from NT$66.6 in to NT$68.08, the report added.
Meanwhile, the sector's profit margins are shrinking, said Daniel Hsin (辛日祺), researcher at Capital Securities Corp (群益證券).
Against this backdrop, many convenience stores have been expanding business scope to collecting various bills, including utility, telephone and credit card payments. They also started to exploit online shopping. For example, Uni-President Group (
"I believe the heavyweights will keep making money but the market is just too saturated for new entries," Wu said.
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