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Hypermarts may merge

"Of course, this movement is aimed at the vast China market."

Jennifer Wang, a senior manager at ACNielsen

The proposed merger between the nation's two major hypermarket operators, Far Eastern Geant (愛買吉安) and RT-Mart (大潤發), will certainly create a hotly-contested battle within the sector and may not necessarily benefit customers, a market watcher said yesterday.

"Judging from their combined sales last year, RT-Mart and Geant together will be a much tougher competitor for the market's biggest player, Carrefour Corp Taiwan (家樂福)," said Jennifer Wang (王琇姿), senior manager at ACNielsen's retail measurement services.

Wang said the merger would not be completed within a short period of time, as there will be many obstacles to overcome, such as how to bridge the various gaps between the companies, which will take the lead, which brand to use and how to allocate the workforce, among others.

"Therefore it is too early to say what impact it will have," she said.

Wang made the comments on news that Douglas Hsu (徐旭東), chairman of Far Eastern Group (遠東集團), the parent company of Geant, said he had been in talks with Ruentex Group (潤泰集團) Chairman Yin Yen-liang (尹衍樑), owner of RT-Mart, to discuss a possible merger of their hypermarket businesses at an investor conference Tuesday.

"I have exchanged ideas with Ruentex Group Chairman Yin on this matter ... To form an alliance or even enter into a merger [between the hypermarkets] is definitely possible," Hsu said Tuesday night.

RT-Mart generated around NT$37.5 billion in sales last year with 22 outlets across the nation. Geant saw about NT$16 billion in sales last year and expects to add 7 stores by 2006 to its current 13 outlets.

If these two join together, the market size and sales of the newly-formed company are expected to outshine those of Carrefour Taiwan, whose 32 outlets generated more than NT$50 billion last year.

Wang said the news of their teaming up did not surprise her.

"At the end of 2002, this idea of cooperation was already developed between their French parent companies and an office was established in Shanghai last year to deal with joint purchases of goods," Wang said.

"Of course this movement is aimed at the vast China market, but it will definitely influence the sector in Taiwan," she added.

The France-based Auchan SA holds a 67-percent stake in RT-Mart, and the French group Casino garners 50 percent of shares in Geant.

Taiwan now has more than 100 hypermarts and the density is pretty high among Asia-Pacific countries, according to Wang.

Despite the cutthroat competition, Wang said the proposed strategic alliance between RT-Mart and Geant -- which means a possible joint purchase of goods as well as combining customer-member lists -- would not pose an imminent threat to the biggest player.

"Carrefour Taiwan will have time to expand its business and adjust its merchandise structures," she explained.

But from the consumers' point of view, Wang said the public is not necessarily the winner.

"On the one hand, joint purchases and cooperation would cut back on costs, which should reflect in prices. This is good news for the public," Wang said.

"But, on the other hand, the alliance or even merger will leave customers fewer choices, as the hypermarkets will share more similarities," she said.

By that time, competitors will have to provide different services to differentiate themselves, Wang said.

Both RT-Mart and Geant yesterday stayed low key and refused to elaborate on the details of their proposed merger.
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