Fri, Nov 28, 2003 - Page 11 News List

Kaomart's closure no surprise to industry

ECONOMY OF SCALE Lack of cash forced the hypermarket company to suspend business two days ago and rivals said it was just too small to compete against them

By Amber Chung  /  STAFF REPORTER

The unexpected closure on Wednes-day of Kaomart (高峰百貨量販), a 28-year old local hypermarket chain, did not surprise its rivals yesterday, because the company had failed to transform business to fulfill customers' demands, industry veterans said.

"Kaomart is a relatively small retail chain. Its closure would not have much influence on the market the way Makro's withdrawal from Taiwan earlier this year did," said Sarah Wu (吳明君), corporate affairs manager at Tesco Stores Co Taiwan.

With a shortage of up to NT$50 million in cash, Kaomart suspended business two days ago. More than 400 employees have reportedly not been paid in two months.

Wu said Kaomart failed to transform and upgrade its service in response to increasing competition in the hypermarket sector, which is dominated by foreign operators such as Carrefour, Tesco and Far Eastern Geant.

"A certain percentage of products sold by hypermarkets or supermarkets should be fresh products. But Kaomart had none," she said.

Tesco entered the nation's retail market four years ago. With four outlets nationwide, it hopes to achieve about NT$8 billion in sales this year and open six more outlets in the next three years.

RT-Mart International Ltd (大潤 ), the nation's second-largest hypermarket chain with 21 outlets, said Kaomart was more like a small grocery retailer, which had not developed a sophisticated know-how in the marketing and management of fresh products, as it provided neither quality service nor a variety of products.

"Kaomart's sale areas were old and small without enough lighting ? they were too small to have power in negotiations with suppliers on lowering product prices," said Fiona Wang (王彤芳), RT-Mart's marketing manager.

Kaomart's failure also came as no surprise to some of its 2,500 suppliers, who said they had begun taking steps to hedge their risks about a year ago.

"We saw that Kaomart might face financial difficulties following the closure of its Panchiao outlet around one year ago," said Yeh Chi-min (葉啟民), a customer division chief at Yunlin-based I-tung Co (億東企業), which supplied San-hao Rice (三好米) to Kaomart.

"We asked Kaomart to pay every week in cash. Our losses should be less than NT$200,000," Yeh said.

Uni-President Enterprises Corp (統一企業), the nation's No. 1 food company, started to demand cash payments several months ago.

"The incident is not expected to have a great impact on our business. We estimate the loss will be under NT$300,000," said a public relations specialist surnamed Wu.

None of Kaomart's rivals has expressed an interest in taking over any of its outlets.

"Most of Kaomart's outlets are in older commercial areas and do not have enough parking, which is essential to attract customers. It is not ideal for us to take over their remaining outlets," Tesco's Wu said.

Kaomart was established in 1975 by the Kao-feng Group (高峰集團). At its peak in 2000, it had 10 outlets in Taipei City and Taipei County. This month it was down to five outlets.

Its annual turnover last year was reportedly NT$1.8 billion.

Kaomart will meet with its suppliers today to discuss how to resolve its financial difficulties.

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