Major discount retailers in Taiwan are forging ahead full-steam with promotions of their private labels to attract price-conscious customers, despite a recent study which showed that Asian-Pacific countries were still in the initial stages of developing private labels.
"Retail prices for these own-brand items are usually 20 percent to 30 percent lower than market brands, with some even dipping to 40 percent," said Jurene Hsiao (蕭安雯), public relations manager of Carrefour Taiwan.
Although the prices are fairly competitive, she said gross margins are comparatively higher because no advertising fees are required.
In addition, hypermarket operators do not have to share profits with suppliers, as they have formed partnerships with local manufacturers to develop these product lines, she added.
Carrefour initiated its lowest-price, own-brand products in 1998 and re-packaged the series under a single logo in February this year to highlight the concept in its 33 outlets nationwide.
"The consumer response is quite good, as the turnover has grown 150 percent over the past seven months," Hsiao said.
The nation's largest hypermarket chain plans to double revenues of its private label to NT$3 billion (US$89 million) by the year's end with more than 1,000 in-house branded items, according to Hsiao.
Taiwan's second-largest operator, RT-Mart (大潤發), is also banking on its "First Price" commodities to carve out a bigger market share. The company started to roll out 800 low-price, own-brand items this month, promising that consumers can obtain cheap products all year round without having to wait for sales periods.
By showcasing a wide range of own-brand products in its 22 outlets around the country, RT-Mart projected that these products would bring in NT$1.5 billion, or 10 percent of the company's total turnover, it said in a statement yesterday.
While the top two operators are optimistic about the market prospects of private labels, an analyst said that most local consumers prefer leading foodstuffs and consumer electronics brands, which would be a major obstacle to retailers.
"Local consumers still care about brands, because quality is ensured," Jennifer Wang (
Wang said consumers tend to avoid the private-label products, as lower prices sometimes diminish people's trust in product quality.
According to ACNielsen's global survey conducted in 36 countries last year, Asia-Pacific countries were still in the initial stages of developing private labels, compared with their Western counterparts.
The survey concluded that, because this marketing concept has a longer development history in the West, own-brand product revenues accounted for 22 percent of the national total in Europe and 16 percent in North America last year, while the figure only stood at 4 percent among Asia-Pacific retailers.
Nonetheless, own-brand products managed a 14-percent growth rate in the region from a year earlier, Wang said.
The concept does have market potential in Taiwan, but retailers will have to employ marketing strategies stressing quality to win over the public's trust, rather than relying on rock-bottom prices all the time, Wang said.
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