FamilyMart IPO attracts little interest from pundits

Pundits were lukewarm on the initial public offering of the nation's number two convenience store, FamilyMart Taiwan (全家便利) yesterday, citing weak market outlook and market saturation.

"The convenience store market is becoming saturated, and I estimate the industry won't grow significantly in the short term," said Bryan Chiang (江志豪), fund manager at Invesco Taiwan.

FamilyMart fell on its trading debut yesterday, dropping 6.8 percent to NT$23.3.

With 1,194 outlets currently in operation around the island, FamilyMart Taiwan is a subsidiary of Japan-based FamilyMart Co, which owns about 48 percent of the Taiwan venture.

According to Chang Jen-dung (張仁敦), vice president at FamilyMart Taiwan, the company plans to open 114 outlets in 2002, after setting up 150 new outlets in 2001.

The move pits the Japanese brand against President Chain Store Corp (統一超商) with its market leading 7-Eleven stores.

While there are already a whopping 2,964 7-Eleven stores in Taiwan, Hsu Chung-jen (徐重仁), president of President said yesterday the group is still expecting to open another 280 outlets this year.

According to Invesco's Chiang the real prize in the region is opening stores in China.

"To boost their businesses operators in the industry may have to tap the mainland Chinese market."

"If FamilyMart Taiwan can get a franchise to operate convenience stores in China, it will benefit the venture a lot."

FamilyMart Taiwan's Chang said the venture is currently working to obtain approval from its Japanese parent company for it to operate a franchise on the mainland.

President Chain Store, also keen on developing the China market, has been locked in fierce competition with several potential licensees from Japan and China. Chairman of the Uni-President Group Kao Ching-yuan (高清愿) said yesterday that he hoped the group's President Chain Store would ink a deal this year with 7-Eleven Inc of the US to allow it to open stores in China.

Kao made the remark yesterday during a meet with local press in Taipei. He predicted there was a "60-percent chance" the group would obtain a license during the first half of the year to open its first store in Shanghai or Beijing in the fall.

Dallas-based 7-Eleven had said last year that it would evaluate its current business relationships and other factors as it sized up the China market and was expected to have a clear strategy for the market by the first quarter of 2002, according to Bob Jenkins, vice president of the company, while he was attending a three-day annual international conference of 7-Eleven store operators organized by President Chain Stores last June in Taipei.

With NT$18.2 billion in sales last year, FamilyMart forecast NT$20.8 billion in sales for 2002, while revenues of President Chain Store this year are estimated to grow 10 percent or more from last year's NT$64.8 billion.

But, another industry analyst suggests convenience store operators should focus more on "service" [rather than sales] this year.

"The sales growth coming from selling "products" such as beverages and toiletries is very limited, thus they should try to generate income from services," said Abby Chen (陳慧宜), a retail industry researcher at KGI Securities Corp (中信證券).

These services include bills or ticket payments, home-delivery services or ATM banking services, she added.