Wed, Feb 16, 2005 - Page 11 News List

Carrefour makes bid to undercut the competition

PRICE WARS As competition in the sector heats up, the nation's leading discount chain is spending NT$1 billion to slash prices across a broad range of products

By Jackie Lin  /  STAFF REPORTER

A shopper browses yesterday at the French-owned hypermarket Carrefour, which has vowed to slash prices on many products in a bid to attract customers.

PHOTO: GEORGE TSORNG, TAIPEI TIMES

Believing that offering the lowest-priced products is the basic requirement for operating hypermarkets, Carrefour Taiwan is planning to pump NT$1 billion (about US$31.7 million) into an effort to reduce retail prices and strengthen its competitiveness.

"To solidify our `leader in price' image, we'll put in additional investments of NT$1 billion to benefit our customers," said Marc Oursin, general manager of the nation's leading discount chain.

The retailer's price-cutting investment, accounting for 2 percent of its revenues last year, will be reflected in everything from instant noodles to towels. It aims to fulfill the chain's promise of providing the most attractive prices in the market, thereby enticing more shoppers and boosting overall revenues.

Carrefour may need to do more to expand its customer base while eyeing the massive consumer traffic of traditional wet markets in this country, which are worth some NT$240 billion per year.

"We expect to open three to four new stores every year," Oursin said in an interview on Jan. 31.

This year, Carrefour plans to invest another NT$10 billion to add four branches to the current 34, he added.

The retailer's short-term goal is to reach 50 outlets by 2008 and double last year's revenues to challenge the NT$100 billion mark, Oursin said.

Hailing from France, Oursin, now 40, was assigned to head the French chain in Taiwan in June 2003, after serving as general manager of Carrefour in Thailand and South Korea for a total of four years.

Although his ambitious strategy sounds rosy, the company faces intensified competition with other retailers, who all hope to expand here with bigger store networks across more cities. Indeed, declining sales at Carrefour's "comparable" stores -- referring to those which have been operating for more than a year -- raised questions as to whether the nation's retail sector is too crowded with competitors and therefore less promising than the company has predicted.

Carrefour raked in NT$50 billion in revenues last year, representing 6 percent growth year-on-year and over 30 percent in the domestic hypermarket section. But revenues in its "comparable" stores dropped by 5 percent.

Oursin said that increased competition took a toll on revenue increases last year, but that he's confident that a double-digit growth in annual sales is possible this year.

Moreover, in the future the retail sector will be dominated by hypermarkets and convenience stores, leaving supermarkets and wet markets grappling with a dwindling market presence, Oursin said.

Taiwan currently has 81 hypermarkets and nearly 8,000 convenience stores, weaving an extensive network serving the nation's 23 million people. In a similar way that 24-hour convenience stores have eliminated most mom-and-pop grocery stores, hypermarkets that gradually raise the ratio of fresh foodstuffs they offer are looking to get business from consumers who used to frequent supermarkets and traditional markets.

Supermarkets and wet markets will find it very difficult to survive, Oursin stressed.

Nonetheless, fierce competition in this industry is here to stay and that's why other retailers like RT-Mart (大潤發) and Tesco are also searching restlessly for the best locations for new stores -- be they smaller outlets or bigger ones.

RT-Mart, a Taiwanese-French hypermarket venture, has also bitten the bullet and lowered prices on thousands of items.

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