OK slams 7-Eleven parent

White-hot competition in the convenience store sector has led to what a smaller operator tagged vicious rivalry that undermines already difficult operations, an executive with OK Convenience Stores said yesterday.

The market is dominated by President Chain Store Corp (統一超商), which runs the 7-Eleven franchise with 4,219 stores nationwide. It has cornered a saturated market with a 45-strong percent share.

For a nation of 23 million people, each convenience store serves a pool of less than 3,000 people, a level which operators see as crucial to sustaining profitability.

But the No. 4 player, OK Convenience Stores, yesterday pointed the finger at the market leader, accusing President Chain of unfair practices.

"A number of our better performing stores were forced to close down as President Chain offered higher rents to win over the landlords' contracts. In some cases, they also deliberately opened new outlets near our stores" just to slash OK market share, said Roy Wu (吳光昌), vice president of the firm's corporate strategy division, on the sidelines of a press conference.

OK, with 910 stores, yesterday launched its second large-scale NT$170 million (US$5.2 million) marketing campaign featuring colored Disney-themed miniature soccer figure giveaways, hoping to boost revenue by 30 percent by the end of September.

Wu said that in Japan's more mature market for convenience stores, operators would not launch such oppressive strategies, but instead evaluate whether a certain region holds potential before making the decision to expand.

"[President Chain] has enough capital to support money-losing stores for drawn-out tug-of-wars," he added.

Executives of President Chain and No. 2 player Taiwan FamilyMart Co (全家便利商店) downplayed the accusations, saying these were natural strategies in the retail world, which usually favors those with deeper pockets.

"Securing good locations with higher rents seems a normality as we've been also treated by competitors in the same way. But if companies fail to offer better-quality services and product mix, I don't think consumers will be lured back to spend money in bigger players," said Lillian Lin (林立莉), public relations manager of President Chain.

Taiwan FamilyMart vice president Yeh Jung-ting (葉榮廷) offered a similar view, saying that the market would not face a saturation problem but that the players' market shares would be redistributed following intense competition.

This meant that "extreme" strategies would be just be one of the types employed, he said.

Since last year, when the convenience store market saw the total number of chained outlets topping 8,000, major operators have seen their expansion slowing and revenue growth weakening.