Taipei Times: Watsons is well-known for its lowest-price guarantee over the past two years. What strategies do you employ to maximize this appeal to consumers?
Gordon Reid: We inspected the whole retail business in Taiwan two years ago and tried to redefine Watsons' position in the marketplace from other retailers. Actually, we didn't offer the best prices at that time. But we found that we had a great chance in this niche after learning that some other retailers charged higher. We then launched the lowest-price campaign in a bid to expand market share, and it has worked well during this period.
PHOTO: CHIANG YING-YING
We've got 2,500 staff to keep an eye on the local competition and feed information back to our headquarters. Then another 25 full-time employees are in charge of assembling the notes and reports and updating sales prices in the system.
That's how we got the best prices in the market. At the same time, we offer good-value promotions.
If everywhere else in the market is undercutting us or doing promotional prices, then we'll match it. So customers can come in and have confidence that they will get the best prices and the best promotions. Of course, to do this we need to establish good relationships with our suppliers.
Most of them are willing to cooperate with us and offer low prices as we show them how we can sell their products better. Initially we got a handful of requests for refunds every week. As we became more organized, it's getting less and less now. As a result, we reported an average 30 percent increase in annual sales revenue after employing this strategy.
TT: Watsons introduced the "color-coding" system to the Taipei 101 store late last year, which is also being used by another drug and cosmetics chain. What's the consumer response to the new setting? Will you expand the system to other outlets as well?
Reid: Customers have responded well to the color-coding system in our Taipei 101 outlet, which is also our flagship store. The system highlights three major product categories -- health, beauty and fun -- with a color directory. Customers can easily find what they want by the color board on top of the shelves. We plan to use the system in any new stores we open this year, not every existing Watsons store.
However, we are in the process of giving every store a better look. This year we want to put in new lighting, new graphics and new sandwich boards in every single store.
We've already done 24 stores this year, and are going to revamp our top 25 stores to create a better shopping environment for consumers.
TT: What have been the changes in Taiwan's retail market over the past few years? Will, or has, the participation of new players such as hypermarkets and virtual stores brought changes on the market? Will you consider developing e-commerce in the near future?
Reid: I think hypermarkets and supermarkets are less developed in Taiwan than anywhere else in terms of the number of stores. People still trade individually in local areas and go to traditional markets just like in the UK 20 years ago.
To me, it's quite exciting and interesting. Their participation, however, somewhat made people here develop different modes of shopping behaviors. For example, more and more people do recreational and planned shopping in hypermarkets during weekends with their families, while doing convenience and available shopping in residential areas during weekdays.
As for the mushrooming of online stores, I think they still have certain limitations in terms of convenience and instantaneity. Watsons, as well as other convenience stores are always there ready to bring daily commodities like shampoos and toothpaste to consumers when they run out of these products.
Thus, we have no plan to sell online but merely use the Internet as a marketing and information tool providing company profile, product and health information.
TT: With the considerable presence of newcomers to vie for market share, do you think the local retail market is saturated?
Reid: I don't think so. There is always opportunity to drive the market. Obviously, when one company is growing, somebody else is shrinking. At the same time, the market is driven by new products that hit the market all the time. For example, in the cosmetics business, there is a 5 percent product turnover every year. It's always changing, and that's what drives the business. And then what we need to do is to make us available in the marketplace to meet our customers' need and then look for proper locations.
TT: From drugs, cosmetics to snacks and daily necessities, Watsons has been expanding its product categories since it entered Taiwan in 1987. What new items do you plan to bring in.
Reid: As heath and beauty are the strongest areas in terms of sales, we will introduce a few new lines this year. We will also bring in a whole range of Japanese snack food, candy bars and baby products including lotions, clothing, and equipment in our 310-ping superstore that will open in Keelung on Monday [today], which is the largest Watsons store in the world. In the store, we have set up film processing kiosks for customers to develop photos taken by digital cameras while shopping.
In addition to products, we are strengthening our consultancy service as people are more conscious about health and beauty issues. The pharmaceutical consulting in the Taipei 101 store, for example, is especially welcomed by customers. I think this type of pharmacy will have a good role to play in Taiwan. It will be a place for people to look for advice in the early stages of an illness, rather than go directly to the doctor for help.
TT: Your products and services are more female-oriented. As many industries such as the fitness sector are targeting male consumers for their high purchasing power, do you plan to follow suit?
Reid: I think the retail industry is probably geared more toward women. Our research found that it is the female who buys for the family. Females are the ones watching TV and who decide what to buy or which brand to buy, while men have less brand-name conscienceness.
This is the whole dynamic of shopping. For example, condoms are designed for guys and therefore companies made the whole package very male-focused. However, they found that 90 percent of condoms in UK are bought by females. Nevertheless, in recent years, more products are being made for men, such as male facial cleansers and hair gels, making male customers a potential area of growth. We'll keep an eye on this.
TT: Like other enterprises that are keen to capitalize on the world's fastest growing economy, Watsons has speeded up its franchising in China. What is your strategy in this market?
Reid: Watsons label is very popular in China in terms of customer base and development, as we've been there around 15 years. We do have valuable offers for Chinese consumers, which for us is fundamental. We also have customers that trust us and choose certain products in our stores. As we have started the lowest-price guarantee in Taiwan, we may bring it across and see how it works there. There is obviously an opportunity for us to grow as we got in there early and understand what people want from other new players. The marketing strategy in the market varies depending on the regions, as shopping behavior varies in different areas.
TT: What are your goals for the Year of the Monkey?
Reid: We are going to open at least 25 new stores plus two super stores within the year as the economy is picking up, and hope to see a single-digit growth in sales revenues for each store. We actually closed 15 stores last year. To evaluate a store and make a quick decision on whether to continue the operation or not is also very important. We closed some of our busiest stores because the bus stops nearby were moved. Change is the essence of the retail industry, and therefore we need to react to the changes quickly.
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