Thu, Jun 01, 2006 - Page 12 News List

Fortress closing all but two local stores

UNDER PRESSURE Hong Kong's largest retailer decided to close 12 of its 14 outlets in Taiwan, a move ascribed to market saturation and the current consumer crunch

By Jason Tan  /  STAFF REPORTER

The saturated consumer electronics and home appliances retail market has forced Hong Kong's largest retailer, Fortress, to close 12 of its 14 outlets in the country.

Fortress closed six outlets in April, and is scheduled to turn a further six stores over to Watsons Taiwan, the nation's largest health and cosmetics chain.

Fortress and Watsons are sister companies under the A.S. Watson Group.

"Taiwan has too many electronics and appliances stores, not to mention that hypermarkets are also selling similar products. The highly congested market has generated stiff price wars that eat into operators' margins," Steven Chen (陳世明), deputy general manager of sales at Taiwan Kolin Co (歌林), told the Taipei Times yesterday.

Fortress is a major retail outlet for Taiwan Kolin, which is the nation's leading producer of home appliances.

Having moved into Taiwan in 1998, Fortress is comparatively newer and smaller in scale than rivals Tsann Kuen Group (燦坤實業), which was set up in 1978 and now has 192 outlets, and E-Life Mall Co (全國電子), which was established in 1975 and has 249 stores.

Rivalry is getting more intense after hypermarkets including Far Eastern Geant (愛買吉安), Carrefour Taiwan (家樂福) and RT-Mart (大潤發) have slashed prices of electronics and appliances to attract the budget-conscious public, Chen said.

"The bad loans problem caused by consumer credit and cash card defaults in the first quarter dragged down private spending. Sales of consumer PCs, for instance, have been sluggish in the first five months, affecting the business of retailers," HP Taiwan Ltd vice president Dennis Chen (陳敬宏) said.

When Peter Dove, managing director of Fortress, visited Taiwan in April last year to witness the opening of Fortress Taiwan's 10th outlet in Taipei, he vowed to expand to 30 outlets by the end of the year with an investment of NT$150 million (US$4.7 million).

Instead of following competitors into a price war, Dove said at the time that Fortress Taiwan would be sticking to its principle of offering "value for money" premium services and a trendy shopping environment.

However, events this year have not turned out as favorably as the company had hoped.

"The retail market in Taiwan is fiercely competitive. We had to review our operations and restructuring accordingly to find the correct business model," Teresa Pang (彭秀群), Fortress spokewoman in Hong Kong, told the Taipei Times via phone on Tuesday.

After Fortress' 12 stores cease operations, there will only be two left -- one on Zhongxiao East Road and another on Nanjing East Road.

"These two are the newer, trendy shops that cater to consumer and market demands. Their performances meet our business expectations," Pang said.

The two stores will continue to focus on sales of digital products including cameras, notebooks, flat-screen televisions and mobile phones, she added.

Pang also assured customers that product warranty and after-sales service will be maintained as usual at the two remaining shops, and employees' benefits will not be compromised, as there are chances for internal transfer.

However, Taiwan Kolin's Chen cautioned that instead of focusing on digital electronics products -- whose margins fluctuate -- retailers should consider selling more home appliances.

"Household products such as fridges and washing machines offer reliable and higher margins, and this will increase business sustainability," he added.

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