The nation's top two oil suppliers probably never imagined that they would be selling lattes and blenders in the course of operating their service stations, but that is what they are doing.
Ever since a price war broke out in 2002 when relative newcomer National Petroleum Corp (
National Petroleum entered the market in 1989, thereby spurring a spate of competitive price wars and giveaways between it and its rivals, state-run Chinese Petroleum Corp (CPC,
In 1999, the company sought to garner loyal customers with membership cards that offer cash rebates and discounts to cardholders. The company says these tactics have been proven to work.
Within 15 years, it has opened over 80 gas stations nationwide and secured over 75,000 members.
"Like the high-tech industry, the oil market is entering a micro-margin era, and therefore it is necessary to diversity the range of our operations," National president Tsai Chia-chang (
National Petroleum now plans to upset its two bigger rivals by forming strategic alliances with a slew of retailers, such as Tsann Kuen 3C (
Under the partnership, National Petroleum will provide discounts and coupons for daily necessities, electronic appliances and coffee instead of the tissue and bottled water.
Besides helping boost gasoline sales, non-gasoline business is becoming a large slice of company revenue, thus raising the prospect of an even larger price war.
With strong backing from Jih Sun Bank (
The promotion is set to be in effect for the entire year. Chinese Petroleum, Formosa and smaller competitors such as Mech-President Corp (統一精工) have no choice but to cut their prices whenever National Petroleum launches a price war and stocks up on gifts with which to lure customers.
National Petroleum reported revenue of NT$13.4 billion last year, up from NT$11 billion in the previous year.
Non-gasoline business accounted for 36 percent of its earnings, a number that Tsai said he hopes to continue increasing.
Commenting on its smaller rival's flexible marketing strategy, Liao Tsang-long (
"But the product itself is still the most important element in running the business," he said.
Chinese Petroleum has 1,694 gas stations nationwide.
"Many consumers still stick with us despite the incentives provided by competitors. This is why we hold up to 70 percent of the market share 15 years after the opening up of the oil market," Liao added.
Matiz Lin (
Formosa Petrochemical runs 550 gas stations around the nation.
As the goal for this year, Tsai said the company wil seek strategic partners and start to franchise its brand, aiming to open 110 gas stations by the end of the year, and increasing its market share in terms of oil supplies, which is about 6 percent.
"It's like fighting a group battle ? the more partners you have, the greater the chance you will win," Tsai said.
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