Driven by intense competition and slow growth in domestic demand, the nation's retail market this year should at most post stable increases with few variables likely to shake up the industry, market watchers predicted.
"Our observations will be focused on economic expansion and whether exchanges between Taiwan and China will be further relaxed," said Neo Lee (
The general merchandise retail industry, including convenience stores, hypermarkets and department stores, raked in revenues of NT$587.6 billion (US$18.4 billion) for the first 10 months of last year, up 3.01 percent from the previous year, according to the latest figures provided by the Ministry of Economic Affairs.
With signs of business saturation appearing, the retailers' operational strategies this year will focus on increasing revenue in "comparable stores" with well-orchestrated marketing campaigns rather than rapid store expansion.
"Comparable stores" refer to outlets that have been operating for more than a year.
CONVENIENCE STORES
Last year, the number of 7-Eleven outlets, operated by President Chain Store Corp (
But the total number of convenience store outlets could climb to between 8,500 and 9,000 nationwide this year.
"Of course competition is getting much more intense, but what we are more concerned about is whether people's consumption habits are changing in favor of convenience stores," said Yeh Jung-ting (
To court public favor, chain stores have expanded service categories by offering photo development services and collecting fees on behalf of banks.
Although rivals are quick to duplicate each other's strategies, "The major principle is to unite with our business counterparts to compete against different sectors so that the pie will continue to grow," Yeh said.
Even so, the sector has to face the reality that margins are threatened by fierce rivalry.
This led to several waves of large-scale marketing campaigns led by the top two players last year.
SinoPac's Lee said the shift toward heavily invested marketing strategies was understandable because store expansion had slowed.
Ideal store locations had been used up and market segmentation was becoming increasingly difficult, he said.
"Only big players are likely to survive in the mature market. Small operators may need to unite with their counterparts," Lee said.
HYPERMARKETS
While convenience store operators remain eager to fill in vacant lots with new outlets, hypermarkets are taking a more conservative approach on concerns that the declining birth rate could eventually become an adverse factor.
The hypermarket industry posted NT$118.2 billion (US$3.7 billion) in sales for the first 10 months last year, only edging up by 0.4 percent year-on-year, government statistics show.
Cutthroat competition has forced the British retail giant Tesco Plc to pull out of the local market, with its six stores and two development sites to be taken over in the first quarter by the nation's largest hypermarket player, Carrefour Taiwan.
"Retail performance in 2006 should, at most, remain stable. We shouldn't be that optimistic," Kaufmann Wei (魏正元), president of RT-Mart (大潤發) with 23 outlets around the country, said last month. "Our expansion plan will be conservative."
To break through their low-margin predicament, operators have turned into landlords by leasing retail space in their shopping malls.
"The mega mall concept will be the future trend as people nowadays prefer one-stop shopping," and rental income could make up for shrinking margins, said Wendy Yang (楊文婷), marketing director of Far Eastern Geant (愛買吉安).
Spacious, brightly lit sales areas and the inclusion of several upscale fashion brands have also become must-have features to cater to quickly changing customer demand, she added.
Far Eastern Geant, for instance, has Burberry and Calvin Klein strengthening its image.
DEPARTMENT STORES
Compared with the hypermarkets' relatively quiet expansion plans, the department store sector is quite active, with three new stores opening last year and at least another three to join the battle this year.
Breeze Center's (
This year, Eslite Corp's (誠品) new store was inaugurated on New Year's Day, with Pacific Sogo Department Store's (太平洋崇光百貨) new location in the capital and the Uni-President Group's (統一集團) Dream Mall (夢時代購物中心) in Kaohsiung to launch later this year.
Believing the government will push through more economic stimulus policies, Alex Ro (
SinoPac's Lee said the conglomerates' substantial investment has been made on the assumption that the government's three-links policy will be relaxed in the near future to allow more Chinese capital and people into Taiwan.
"As long as the economy sees sustainable growth, with Taiwan's ties with China gradually improving, it's a natural strategy for them to continually cast nets for the bigger fish ahead," he said.
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