Hello Kitty craze a tough act to follow

COLLECTIBLES: After sales shot up as high as 36 percent, President Chain Store is looking for a way it can build on the consumer loyalty gathered from a successful strategy

By Jackie Lin  /  STAFF REPORTER

Mon, Aug 08, 2005 - Page 11

After a marketing campaign of collectible Hello Kitty magnets became an immensely popular hobby in Taiwan, President Chain Store Corp (統一超商), which runs the nation's largest convenience store chain, 7-Eleven, is now finding itself in a complex situation.

On one hand, all the efforts in the campaign were paid off as the chain saw record-high monthly sales in both May and June. But because this strategy proved so effective, President Chain is striving to come up with more powerful ploys to top the Hello Kitty idea.

In late April, President Chain started a three-month-long marketing tactic featuring the Japanese cartoon icon Hello Kitty. President Chain invested NT$200 million (US$6.3 million) which had proven to be an amazing catalyst to stagnant sales in Singapore and Hong Kong, where the campaign was first introduced.

The campaign will officially come to an end tomorrow, although some outlets have already run out of the three-dimensional magnets.

Fueled by this campaign, President Chain's sales totaled NT$8.43 billion in May, up 22 percent from NT$6.93 billion a year ago, and the figure continued to soar by 36 percent in June to NT$9.39 billion. Last month's revenues are yet to be made public.

Accordingly, the company's average share price also climbed from NT$58.18 in May, to NT$61.84 in June and further to NT$62.35 last month on the local bourse.

In what it claimed to be the most expensive and comprehensive marketing strategy in the nation's convenience store history, 41 different patterns of Hello Kitty magnets, together with coupons, were given away to consumers who spent over NT$77 each visit to its 3,800-strong outlets nationwide.

The aim was to push up the average spending per transaction from the original NT$62.

During this period, more than 100 million magnets were handed out and only 8 percent of the coupons were used, according to Lillian Lin (林立莉), a public relations manager at the company. In the last month, magnet boards were sometimes in short supply as the chain did not expect such an enthusiastic response.

Limited effect

This is very different from convenience store chains' usual marketing activity, of giving discounts to the second same-item purchased, which can only exert a limited effect, analysts said.

"Convenience store chains cannot lure consumers simply by waging a price war. It requires creativity in both product mix and services," said Jeff Lai (賴建都), a professor of advertising at National Chengchi University.

The company's strategy has propelled other chains to follow up with similar ideas, but the effects varied and analysts estimated that President Chain's revenue might fall back to its previous level without the stimulus of the marketing program.

Taiwan FamilyMart Co (全家便利商店), the No. 2 player, saw its June sales decline by 3.12 percent year-on-year to NT$2.3 billion. It then followed in late June to give away self-designed lottery tickets and offer cash prizes for purchases reaching the NT$66 mark.

At the same time, it was rumored that Taiwan FamilyMart planned to use another famous cartoon figure, Doraemon, to compete with President Chain's Hello Kitty campaign.

But FamilyMart refuted this rumor, stressing that their lotto program has helped July sales rise by more than 10 percent from the June figure, said Esther Lin (林翠娟), a public relations manager at the firm.

Taiwan Nikomart Co (福客多), the nation's fifth-largest convenience store chain, also followed suit to reward purchases surpassing NT$39. The program, launched in mid-July, raised store revenues in the first two weeks last month by 11 percent from June, and the average spending per transaction up 12 percent, the retailer's sales director, Jan Chun-ying (詹淳櫻) said.

These players are laboriously catching up with the market leader's moves, but, restricted by their resources and market share, the effect they created still seems minute.

"When their availability and accessibility have not reached a critical mass, it is hard to produce the effect they desire," said Jennifer Wang (王琇姿), associate director at ACNielsen Taiwan's retail measurement services.

But it is worth observing whether the four smaller chains -- Taiwan FamilyMart, Hi-Life International Co (萊爾富), Taiwan Nikomart and OK Convenience Stores -- will develop a strategic alliance through their online venture, cvs.com.tw (便利達康公司), Wang said. The venture, with the four companies' heads sitting on its board, currently offers an e-commerce platform for the four chains, and facilitates their joint purchases in certain commodities, including bottled water, telephone cards and wine.

Unifying forces

In a meeting late last month, the four chiefs touched upon the possibility of unifying forces and integrating marketing resources to compete head-on against 7-Eleven.

For President Chain, whose 7-Eleven has secured over 50 percent of the market, how to extend the momentum it has gathered on the Hello Kitty fad is the main issue facing its management.

Hsu Chung-jen (徐重仁), president of President Chain, expressed confidence last week that the company's third-quarter sales would exceed those in the second quarter, as it is traditionally the market's boom season and the Hello Kitty campaign has successfully changed consumers' shopping habits.

ACNielsen's Wang held reservations about Hsu's remark.

Wang said consumers choose to shop at a convenience store based on whether it is close. Therefore, without the lure of cute Hello Kitty magnets, consumers may not bother walking a few more steps to patronize 7-Eleven, she said, adding that President Chain may see its revenues fall back to the similar levels before the campaign.

But National Chengchi University's Lai appeared not so pessimistic, referring to the "icash" card, the stored-value cards developed for use in 7-Eleven outlets, that may have the potential to foster consumer loyalty.

Star symbol

In addition, with long-term development, President Chain's cartoon spokesperson, Open (Open小將), could become a star symbol, the equivalent of Mister Donut's mascot Pon de Lion, he added.

"It requires several years of effort and heavily invested marketing -- such as integrating the icon with products, animation and digital content -- to support and make well-known an invented figure, like what we've seen in A-Kuei (阿貴)," a Taiwanese e-cartoon character, Lai said.

"But it will be the direction it has to take if President Chain aims to stand out in the competitive sector," Lai added.