Taiwan' s Retailers Chalk Up Banner Performance in 2005

Thanks to nimble marketing and the addition of new outlets, the President Chain Store Corp., which operates the 7-Eleven convenience store franchise in Taiwan, chalked up a record turnover of NT$93.64 billion (US$2.93 billion at NT$32:US$1) in 2005, securing its place as the largest retailer on the island. The company' s sales are expected to mark a new milestone this year by topping the NT$100 billion (US$3.1 billion) mark. That will mean revenues of NT$270 million (US$8.4 million) per day.

One major factor behind last year' s record achievement was the "Hello Kitty" marketing campaign, which won an enthusiastic response from consumers, especially young people and women. At the same time, President continued setting up new outlets, boosting the total number of 7-Elevens on the island to over 4, 000.

President captured a more than 50% share of the domestic retail market. In second place (and No. 1 in the department store sector) was the Shin Kong Mitsukoshi Department Store group, which racked up NT$61.1 billion (US$1.9 billion) in revenues last year, thanks largely to such factors as the offering of free shopping coupons and the opening of the 13th Shin Kong Mitsukoshi outlet. While Shin Kong was second in sales, its pre-tax profits of NT$6 billion (US$187 million) gave it the highest earnings per share (EPS) in the domestic retail industry, at NT$8. President, by contrast, managed an EPS of just over NT$4.

Sogo Pacific Department Store managed to score a 5% growth in sales last year to NT$31.5 billion (US$984 million) despite the fact that it opened no new outlets and mounted no major promotional campaigns, ranking it second among Taiwan' s department stores.

R-T Mart, Taiwan' s second-largest hypermarket chain, saw same-store sales increase by 8% in 2005, much higher than the 2% expansion experienced by Carrefour, the industry leader. Even that small growth was better than the industry' s average performance, which was flat.

The E-commerce Challenge

Conventional retail stores will face a growing challenge in the future from e-commerce, which appears to be taking off. This new method of shopping has gradually won the confidence of local consumers, as a shopping mechanism using convenience stores for delivery and the collection of payments has been developed and e-commerce retailers have provided trial-use periods and a means of returning goods. After they achieve economies of scale, e-commerce retailers will be able to offer products at much lower prices than bricks-and-mortar stores can afford, while still making relatively high profits.

On-line shopping in Taiwan soared 50% to a total of NT$59.8 billion (US$1.87 billion) last year. The total is expected to surpass NT$100 billion this year, according to a forecast by the Institute for Information Industry (III). E-commerce, it appears, will be tomorrow' s star performer in Taiwan' s retail industry.

PC Home and PayEasy, two major e-commerce players, chalked up growth rates of 60% to 80% last year; with a total of over 400, 000 orders for the year—or one transaction every four seconds--PayEasy saw its profits double in 2005. Major companies in the field are targeting a doubling of revenues in 2006.

The direct-sales business has rebuilt its image and is also doing better in Taiwan, recording growth rates several times those of the island' s overall growth rate since 2000. In 2004 the total revenues of direct-sales businesses jumped 30% to NT$68.3 billion (US$2.13 billion), and it is only a matter of time until they break through the NT$100 billion barrier. (PL, Feb. 2006)