Sat, Aug 23, 2003 - Page 10 News List

Electronics retailers try gimmicks to lure customers

PROMOTIONAL CAMPAIGN E-Life Mall and Tsann Kuen 3C have begun offering consumers a variety of payment plans, discounts and other bargains to clear their shelves

By Annabel Lue  /  STAFF REPORTER

Two of the nation's major consumer electronics retailers have recently begun aggressive promotional campaigns to stimulate domestic demand, but market analysts warned the practice could undermine the industry's thin margins.

The battle to entice consumers started on Thursday when E-Life Mall Co (全國電子), a retail giant with 222 stores across the nation, launched a no-interest 24-month installment plan Thursday on all of the company's home appliances, such as air conditioners, refrigerators, washing machines and stereos.

E-Life also offers the same incentives for consumer electronics, offering deals on Acer-brand computers as well as Nokia and Motorola handsets.

Acer formed an alliance with E-Life Mall three years ago and now owns a 30 percent stake in the retailer.

Aiming to secure its market share, rival Tsann Kuen 3C (燦坤) which operates 117 stores, yesterday initiated a similar campaign with 300 selected items, including handsets, computers, monitors, plasma TVs and refrigerators.

Both promotions are scheduled to run through Sept. 30. But there is a catch.

Tsann Kuen's special offers only apply to customers making purchases with Taishin International Bank (台新銀行) credit cards. As for E-Life's incentives, consumers need to use Hsinchu International Bank (新竹商銀) credit cards while purchasing.

Analysts said both retailers may sacrifice profits for sales. They also added that high-profile promotions are not always effective.

"Retailers may be able to enjoy a short-term surge in sales, while in the long run the practice is expected to hurt market orders," said Belinda Yu (于蕙玲), a deputy manager at Jih Sun Investment Trust Co (日盛投信).

Yu warned that consumers may gradually grow used to special-incentive deals so that it will be difficult for retailers to back off in the future.

"Consumers may decide not to make any purchase unless there are more promotions and bargains," she added.

The consumer-electronics retail sector already suffers from thin margins, another analyst said.

"A slow economy and tough competition have left the retail sector with limited profits," said Chen Chi-hsien (陳奇賢), an analyst at Capital Securities Corp (群益證券).

The retail margin for communications products, such as mobile phones, is about 6 percent, and the average margin for home appliances is around 10 percent, he added.

"The no-interest installment program would cut margins further," Chen said.

The aggressive incentives and discounts that retailers are offering may also cut into product-makers' bottom lines, as the latter are usually asked by retailers to share promotional costs, he added.

Meanwhile, the smaller 3C Net Information Co (旭曜電通), a local computer and communication product retailer with some 50 outlets, plans to offer up to NT$3,000 discounts to people who pay in cash, said Chang Chiao-shen (張朝深), president of 3C Net.

Chang said that not all consumers are interested in joining installment programs. As the life-span of many consumer-electronics is very short, the product may become out-of-date when people finish the 24-month payment, he added.

Nevertheless, Chang reminds the public to read between lines about rivals' promotions.

"They may make use of the chance to sell inventories rather than offering discounts on newly-released products," he said.

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