Mon, Dec 12, 2005 page10

• Retail business reached ceiling: report

  STUCK A retailer-sentiment survey in Asia found that the Taiwanese retail market is almost saturated and that retailers worry about consumer debts and cross-strait policy

  • By Jackie Lin / STAFF REPORTER
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  Strong domestic demand and an increase in tourist spending are key to driving retail-business growth in the short term, according to a report released by Jones Lang LaSalle last week.

  In its second retailer-sentiment survey in Asia, the real-estate services and money-management firm collected information from over 150 retailers from a wide spectrum of trades in 10 key cities, excluding those in Japan and Australia.

  The survey showed 45 percent of the respondents saw stable performance over the past six months and 49 percent expected profit margins to improve in the year ahead.

  According to the Ministry of Economic Affairs' latest statistics, Taiwanese retailers -- including department stores, supermarkets, convenience-store chains and hypermarkets -- posted NT$525.8 billion (US$15.7 billion) in sales for the first nine months of the year, up by 3.17 percent from a year ago.

  But retailers worry that ballooning figures in accounting books are mostly a result of borrowing tomorrow's money for today's consumption -- demonstrating growing consumer debts accumulated on credit and cash-advance cards, as well as from installment downpayments offered by retailers, said Kaufmann Wei (魏正元), president of RT-Mart (大潤發), Taiwan's second-largest hypermarket chain.

  "We've found that some people even have problems paying back their installments, which require only small payments every month," Wei said.

  Alex Ro (羅仕清), a vice president of Pacific Sogo Department Store (太平洋崇光百貨), appeared more optimistic. He said the consumer-loan problem will naturally be relieved when the government dishes out more economic stimulus policies. The company's near-term plan is to open a new store every year in Taipei up until 2009, he said.

  Jones Lang LaSalle's survey further showed that 97 percent of the respondents have plans to expand their business both at home and abroad. The top six expansionary location choices for greater China's retailers are China, Taiwan, the Americas, Europe, Japan and Hong Kong.

  Despite showing optimism toward the coming year, some retailers are apprehensive about impen-ding rental growth that will affect their profit margins.

  Taiwanese retailers can sit back for the moment. The average rental for retail properties in Taipei did not fluctuate in the last five years and rents even fell in the non-prime retail areas, according to Mara Wang (王香完), head of retail services at Jones Lang LaSalle Taiwan.

  She expected rents will stay at the same levels if there is no market stimulation.

  But in this small nation where many businesses are approaching saturation point, retailers worry more about how to further drive up purchasing power parity and the number of consumers.

  The statistics bureau said last week that consumer prices rose by 2.31 percent between January and November year-on-year and the nation's economy is expected to expand by less than 4 percent.

  "The retail performance next year should, at most, remain stable. We don't have to be that optimistic," said RT-Mart's Wei.

  Slow policy-making to boost exchanges between Taiwan and China is one of the major causes concerning retailers, who have been forced to slash prices to survive.

  The British retail giant Tesco has decided to withdraw out of the local market early next year. President Chain Store Corp (統一超商), operator of the world's third-largest 7-Eleven franchise, has launched its second large-scale mar-keting campaign featuring Disney-themed miniature-figure give-aways, which Wei said demonstrates the difficul-ty of making profits in the core business.

  "Taiwan needs to increase exchanges with China, such as allowing more Chinese tourists to visit the nation. Depending on its 23 million population is not enough anymore," Wei said.
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