|
|
|
|
|
|
Hypermarkets a Hit With Taiwan's Consumers
It could be just the sheer volume of
Taiwan’s food retail sector that’s a turn-on for U.S.
agricultural exporters. With $27.5 billion in sales in 1997--up
almost 8 percent from 1996--the food business in Taiwan can't
help but pique the entrepreneurial spirit in any global exporter.
Of course, Asia’s recent financial crisis will affect 1998's bottom line, but be aware that any dip should be just that and not a permanent status quo.
All Taiwan’s food retail segments continue to earn the bucks--including hypermarket, supermarket, department stores and convenience stores. Each serves a broad spectrum of consumers at different times and for different purposes.
The supermarket segment has been stagnant over the last few years and is not expected to grow significantly in the near future. Similarly, the department store segment is expected to grow only slightly during the next few years.
But hypermarkets and convenience stores, which zero in on the current needs of a changing population, are keeping company with dynamic growth rates.
The hypermarket provides a leading competitive edge in the food retail sector, cutting into bottom lines of other outlets while enhancing the choices of consumers. Aptly named, the convenience store provides on-the-go service for busy workers.
The hypermarket and convenience segments outshine the supermarket and department store segments. Growth for supermarkets is expected to be slow, while the department stores are expected to expand only slightly during the next few years.
Hypermarkets, Convenience Stores Thrive
Supermarkets. Numbering almost
500 in 1997, supermarket growth has been hampered by stringent
competition from hypermarkets and convenience stores. A lack of
suitable locations and increased operating costs have also
dampened the sector.
Competition from hypermarkets is expected to increase as the larger stores move to the suburbs.
Convenience Stores. It’s the traditional mom-and-pop stores that are taking it on the chin from convenience stores. The segment is spreading out to the eastern portion of the island and to more rural areas. However, with 500 new stores expected to open each year, the take for individual stores is going down.
Hypermarkets. This star of the food retail sector grew 57 percent from 1996 to 1997. The stores are large, clean, well organized and have vibrant promotion programs. And they draw in droves of customers.
Department Stores. Targeting consumers in the middle to upper economic classes, the 140 stores that sell groceries alongside other products generated $429 million in food sales in 1997, up 8 percent from 1996.
Distribution Channels Simplifying
A registered trading company needs only a $175,000 capital base to handle food in Taiwan. Consequently, many small businesses with tight profit margins play the multiple roles of importer, distributor, wholesaler and even retailer to make ends meet.
This system worked very well with the traditional wet (street) market and mom-and-pop retail formats. However, the competition engendered by hypermarkets and supermarkets has mandated cheaper products.
This competition has changed the way food retailers procure their products. They’re streamlining to avoid the traditional many-layered distribution channels.
In the past, unprocessed foods--mainly seafood, fruits and vegetables--were imported and sold through a network of regional agricultural markets. Replacing these markets:
Product Pricing Pivotal
Welcome to a market where underpricing a product can actually limit customer acceptance. Consumers in Taiwan are very aware of the virtues of a product and are willing to pay a higher price for perceived quality.
Along with price, there are other considerations market entrants need to keep in mind. Retailers looking for new products have definite agendas: market trends, health benefits, convenience and novelty.
Freshness is probably the top concern for consumers, followed by hygiene. Because of the freshness preference, the vast majority of consumers still favor locally produced products, but this is slowly changing.
Domestic Goods Favored by Consumers
Due to small farm sizes, it’s hard for local production to compete with cheaper imports. So leading domestic manufacturers tend to emphasize more sophisticated, diverse products--and they take promotion very seriously. Fortunately for Taiwan's agricultural producers, their customers also tend to be loyal to domestic goods.
Australia, New Zealand, Canada, Thailand and the European Union also provide the United States with competition based on price and novelty.
WTO Entry Just Around the Corner
The domestic food industry is taking a wait-and-see attitude concerning the impact of Taiwan’s membership in the World Trade Organization (WTO).
They do anticipate that imported raw materials will be cheaper. Expected advances in technology, such as the introduction of advanced biochemistry, packaging and storage technology, will also help lower food processing costs, making Taiwan's food industry more competitive internationally.
Good Prospects for Convenience Foods
Today's buzzword is convenience. Besides convenience stores, frozen convenience foods are catching on. Also, sales of frozen desserts, especially ice cream, have been increasing rapidly.
Keep an eye on growth in the imported snack sector too. Though they tend to be more expensive than domestic items and, due to new flavors, often require consumer education, consumers respond readily to new snack product line promotions.
Given the length of time it takes to build brand recognition, the new exporter wanting to enter the market now might consider using existing product lines and distribution channels. For example, "Tropicana" juice from the United States has become a popular brand in Taiwan, due to the aggressive marketing efforts of its joint venture partner, President Enterprise Corp. President has been promoting the brand through its own retail chains.
_____________________________
This report, based on a contract report by Asia Market
Intelligence, was prepared by the Agricultural Trade Office in
Taipei, Taiwan. Tel.: (8862) 2709-2000, Ext. 8286; Fax: (8862)
2305-7073.
|
|