Tue, Dec 07, 2004 - Page 10 News List

Tesco tests the waters in Taichung

HYPERACTIVE The UK hypermarket will open its fifth outlet today in the central city, while analysts say firms in the sector are facing a tougher market

By Jackie Lin  /  STAFF REPORTER , IN TAICHUNG

After entering the nation's retail market more than four years ago, British hypermarket operator Tesco announced yesterday a move into the intensely competitive market of Taichung in central Taiwan, with its fifth outlet welcoming customers in a soft opening today.

Within a five-minute drive from the city's famous Tiger City shopping mall (老虎城購物中心), the new Tesco outlet -- integrated into a complex of 70 businesses, including theme restaurants, health and cosmetics retailer Watsons, Rose Records and brand name garment outlets -- is expected to face stiff competition from its 10 rivals in the populous area.

"Based on opinions compiled from the focus groups we held, Taichung citizens place priority on good quality merchandise and services offered by a retailer, instead of the low-price promises emphasized by our competitors," said Christopher Lin (林清世), general manager the newly opened Taichung branch of Tesco Stores (Taiwan) Co.

Expressing confidence in the outlet's store layout and product mix, Lin projected that first-month sales will reach NT$200 million (US$6 million), outshining the neighboring Carrefour outlet's NT$180 million per month.

According to statistics from the Ministry of Economic Affairs, the nation's hypermarkets saw an unprecedented slowdown in sales in the first nine months this year.

The statistics show that in the January-to-September period, Taiwan's hypermarket operators created total revenues of NT$106.1 billion, down 1 percent from the same period last year.

At the same time, department stores and shopping malls registered annual growth of 13 percent in terms of sales, supermarkets showed 5 percent growth, and convenience store chains saw a 7.45 percent growth rate.

Hypermarket statistics

* According to the economics ministry, sales at hypermarkets fell by 1 percent in the first nine months of the year

* Department stores and shopping malls reported annual growth of 13 percent in terms of sales during the same period

* Supermarkets showed 5 percent growth in the period

* Convenience stores saw 7.45 percent growth


Does this mean hypermarkets have reached saturation?

Lin doesn't think so.

There remains a huge potential for developing hypermarkets here as the still-influential wet markets are expected to see market share dwindle as consumers turn to supermarkets or hypermarkets for fresh-food shopping, he said.

Tesco outlets have seen steady growth in sales although its number of outlets cannot compete with competitors, Lin said, refusing to disclose revenue figures.

Jennifer Wang (王琇姿), associate director at ACNielsen Taiwan's retail measurement services, said the nation's hypermarkets saw 6-percent growth in grocery items, including personal care products and packaged food, during the first nine months this year, according to the company's surveys.

But operators were hit hard early in the year on news reports that some defective household appliances had been sold in hypermarkets, causing potential buyers to turn to 3C outlets for purchases.

Wang said there is no sign the market is saturated, but operators are havingcincreasing difficulties finding locations for new outlets, which explains the less aggressive approach this year. Only one Carrefour outlet launched in the first half of this year in the sector.

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