Tesco, Britain's largest food retailer, opened its first Taiwan store to much fanfare on December 9. The store is located in a space vacated by Makro in the TaiMall in Taoyuan. Over the next five years Tesco plans to open 20 stores in Taiwan that will employ more than 10,000 people all told. With the expectation of 500,000 visits per month, each store will have at least 1,000 parking spaces.
Taiwan is the third Asian market (after Thailand and South Korea) that Tesco has tackled. Sinorama spoke with David Orchard-Smith, the CEO of Tesco Taiwan, about the company's strategies, its plans for Taiwan, and the advantages it intends to offer Taiwan's consumers.
We have 70 years of history in the superstore business, and we have gone through several waves of revolution. Tesco started off selling unlabeled tins, and in the 60s we were first in self-service supermarkets in the UK. By the time we reached the late 60s, I think we had 800 stores. But they were very small, poor-quality stores. In the seventies, we completely redressed our stores, made them look cleaner and smarter. We reduced our prices. The reaction by the general public was so big we just could not cope. Then I think the next revolution for us was the fresh food revolution and the healthy-eating revolution. We worked very hard with local suppliers and farmers. We did a lot of investigation into what people were eating and offered a range of products that were fat-free and had less cholesterol. We took over market leadership in England in about 1992 from our major rival and now hold about 18% market share of the food trade in the UK.
As an international company, we understand the importance of localization. We took on 100 of Macro's staff in TaiMall. We took them on probably 8-10 weeks earlier than we needed them. It's very important for us to fit in with the local culture. In the office here we've got around 100 people. Only 12 are expats. My objective is to make sure that when the expats go after their two- or three-year contracts expire, there are locals to replace them. So our policy and strategy throughout the world is moving into a country to share the knowledge. We have a saying in Britain: "Number one locally, number one globally."
If we can push business to local suppliers rather than take it from abroad, then we will do so. Rather than getting a biscuit over here from the UK, if I can find a manufacturer locally to make it for me, then we will go local. This makes sense financially as well. We estimate that 80% of our products will be made here.
Market potential is what you look for-the current state of competition, spending power, the GDP. All those things help for us to judge a market. We believe that Taiwan is a massive market, and I think it's underdeveloped in the hypermarket business. We can offer quality service. Take cauliflower or flowers, for example. If you buy them in England, they will be guaranteed for a certain period of time. Because we work with the farmers, we make sure the distribution chain has integrity. When the product is picked, it's put into a special container which protects the product. If it's supposed to be chilled, it will be chilled all the way through. We have people checking and testing to make sure all that works. This is the sort of thing we will be developing.
We have already seen the consolidation of local superstores, so RT-Mart bought up competitors, and Far Eastern did a joint venture with the French Casino group. This is all about consolidation in the marketplace because of competition, and it's very good for the Taiwan market. Consumers can get a better and safer environment in which to shop. Good competition is great. The customers are usually the winners.
Taiwan is moving so rapidly. Three years ago, not all the shops would take credit cards. In England, we went from cash to check book to credit card, but you just went from cash to credit card. When the Taiwanese decide they want something, then that's it. Look at the custard [Portuguese egg tart] shops and Hello Kitties. Coffee shops just exploded everywhere.
Some people think the customers care about the price most. I think price is important, but it's not the most important. Comfort, parking, a clean environment, space, and hygiene come before price. Superstore survival is about listening to your customers and exceeding their expectations.
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David Orchard-Smith, the CEO of Tesco Taiwan, began scouting locations and planning stores in Taiwan three years ago. Tesco's meticulously planned first store here finally opened its doors last month. (photo by Hsueh Chi-kuang)
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