FamilyMart set to increase share

Taiwan's convenience chain store market has reached saturation with over 8,000 outlets nationwide, forcing players to consolidate and be more cautious about expansion, executives of Taiwan FamilyMart Co (全家便利商店) said yesterday.

As of the end of last year, the number of convenience stores totaled 8,709. President Chain Store Corp (統一超商), which operates the world's third-largest 7-Eleven franchise, dominates the market with a 46-percent market share, followed by Taiwan FamilyMart's 21-percent share.

"It's not possible for the number of stores to continue building to, say, 10,000, as not all of the existing stores are making a profit ... poorly performing locations are bound to be shut down or improved upon," Pan Jin-tin (潘進丁), chief executive officer of Taiwan FamilyMart, told reporters during a luncheon.

In Japan, some chains have suffered negative growth in terms of number of stores, something which Pan said might occur in Taiwan due to fierce competition from rivals and non-convenience store outlets, such as drugstores.

Despite the competitive situation, market demand remains and the most important lesson for operators is to discover and satisfy consumer needs, the CEO said.

Although the market will not grow any bigger, Taiwan FamilyMart plans to expand its share to 30 percent in a three-year period by cultivating new segments beyond food and daily necessities.

Its three strategies mapped out for this year include strengthening offerings of entertainment and leisure services -- by selling theme park tickets and online game cards via its virtual distribution center, developing new store formats to cater to an untapped customer base and strengthening its electronic commerce systems.

Faced with the difficulty of finding good locations in densely developed city areas, major convenience store operators have marched into the suburbs to establish free-standing outlets, equipped with parking lots, restrooms and indoor dining spaces.

These "suburb concept stores" are doing well on weekends and holidays when tourists swarm to sightseeing spots.

NEW FORMATS

Taiwan FamilyMart is currently studying the possibility of developing other new formats, such as fresh-food stores for nuclear families or upscale outlets in well-heeled neighborhoods, as seen in Japan.

Last June, the company was hard hit by its larger rival President Chain when 7-Eleven outlets launched massive marketing campaigns featuring Hello Kitty magnets. For the first time, Taiwan FamilyMart posted negative growth in a single month.

However, its performance was back on track by September, following months of adjustments in product items and improvements in store quality. It raked in sales of NT$29.68 billion (US$916.8 million) last year, growing by 8 percent year-on-year.

Pan vowed to record double-digit growth this year, something he admits is difficult given the sharp competition.

Shares of Taiwan FamilyMart edged up by NT$0.1 to close at NT$52 on the Taiwan Stock Exchange yesterday.