In the past, when people thought of Taiwan, it was as part of "Made in Taiwan." Indeed for Americans and Japanese in particular, Taiwan has been like an overseas processing plant. However, after news of Taiwan's excess of foreign reserves created a stir in the international media, more and more foreign businessmen have set their sights on the Taiwan market.
The Japanese have been among the fastest to move. Previously, Japanese investment in Taiwan was concentrated in manufacturing, with the aim of reexporting processed goods. But now the focus is to break into the market, with businesses like department stores, supermarkets, fast food, wholesale stores, and construction.
Americans have gained the upper hand in trade, thanks to the recent fall of the dollar, which caused American products to drop one-fourth in price. Since May of last year, well-made and inexpensive American refrigerators, TV's, washing machines, and other products have changed the previous preference of Japanese products, and have made the U.S. into the leading importer to Taiwan, with one-third of the import market.
Hong Kong and Korea are also turning to the Taiwan market. Already two Taipei department stores have purchased over NT$100 million of HK products, and will hold large--scale displays in the latter half of the year. And now Taipei has tens of stores specializing in wholesaling Korean products. Golden Star Electronics has done over NT$650 million in business within its first year in Taiwan.
Last year Taiwan imports totaled US$ 34 billion, an increase of 43 percent over the previous year (the highest rate in the world). The annualized increase for the first quarter of this year is 63 percent, more than double the initial estimates by the Executive Yuan.
How did Taiwan's market reach this level? The head of the Market Development Department of China External Trade Development Council, Dick Mou, has noted that as an exporting island economy, Taiwan's imports in the past consisted primarily of oil and raw materials (two-thirds), but growth figures for the past two years show that Taiwan is a much bigger market than commonly thought. In fact, with a population of twenty million (about that of Canada), a per capita income of US$4,500 (which is expected to pass US$5,000 this year) and many households having two incomes, the purchasing power potential of Taiwan is evident.
"Taiwan's per capita income is just now reaching a turning point," argues Dick Mou. Products that were formerly considered luxuries are now ordinary consumer goods. "Now a lot of products have already entered a high growth period in Taiwan," says Roy Wang, Vice General Manager of Pacific Sogo Department Stores, citing cars, video recorders, and brand-name fashions.
One reason for rapid sales is low overhead. Sam Cheng, General Manager of the Jeng's Agent Ltd., points out, that "You only have to put on one TV ad, and you can reach everywhere, and there is no way for those who should see it to avoid it." Because advertising costs are so low, products like soft drinks or cosmetics, which need intensive advertising to develop their image, can be easily marketed. Recently Mr. Brown Coffee and Stimorol gum have both used this strategy successfully.
Because Taiwan is especially small but densely populated, it is faster and easier to build sales networks or to transport goods. Besides that, there is also incentive for people to "keep up with the Joneses," giving sales an unexpected boost. This has a negative side for business as well--if quality or service is poor, word will get around fast.
Crowded like Japan, Taiwan has also begun to manifest similar phenomena. For example, since housing is expensive, people who invest a lot of money in new homes go all out to decorate them. But "from another point of view the conditions of the Taiwan market are even better than Japan," says Li Chang-yi, Director of the Office of Investment Affairs in the Ministry of Economic Affairs, since Chinese are more receptive to outside things.
Taiwan consumers show their buying power especially in the area of "status symbols." For example, Taiwan has the highest ratio of Mercedes Benz to population in the world. One overseas student commented that Taiwan consumers got rich "too fast" but that their attitudes have not changed, so that they seek to match the once-envied lifestyle of the rich.
"On the good side, this is not yet a fully developed market, so there are opportunities for businessmen," says Dean T. Chiang, a lawyer who frequently assists foreign businessmen in understanding the local market, "but on the other side, the value judgment of consumers in our country is not yet mature, and their buying habits not easy to fathom," leading to problems for foreign businesses.
Nevertheless, sectors such as department stores, do not seem scared off. First came Hong Kong's Sincere, then Sogo from Japan, soon to be joined by Yaohan (also from Japan), with each bigger than the last. It was only restrictions on entry into the Taiwan market that blocked Sogo from coming even sooner.
Indeed, the government policy of opening the market has been crucial. Last year's August issue of American Business, published by the U.S. Department of Commerce, ran an article titled "There Has Never Been a Better Time for U.S. Companies to Sell to Taiwan." The article cited lowered tariffs, the appreciation of the NT dollar, a lower harbor tax, the relaxation of controls on foreign exchange, steps to protect intellectual property, and other factors as making Taiwan an attractive market. And not only for American businesses: sales jumped dramatically for Italy's Fiat automobiles when reduced tariffs on automobiles made Fiats price competitive with domestically produced cars.
The rapid increase in imports has created some interesting new phenomena. In the past, when Taiwan was pushing exports, other countries raised accusations of dumping. Now, says the Ministry of Economic Affairs, there are already quite a few foreign products being "dumped" into Taiwan.
Another phenomenon is that a lot of Taiwan's export and manufacturing companies are now turning to imports. For example, the major trading company Kaolin, after eighteen years of exporting only, has decided to go into direct domestic sales of imported products. Although this is in a sense competing against oneself, businessman Chen Din-Rong argues, in effect, that if the opportunity is passed up, then some competitor will do it.
It's clear: Taiwan is a good market, but Taiwan's businessmen aren't going to let foreign businessmen get all the gravy!
[Picture Caption]
Can you believe it? Taiwan has the highest per capita ownership of Mercedes Benz in the world!
Following the rise in personal incomes, foreign investors have already begun to enter the entertainment market.
The costs of doing business in the R.O.C. are low; a lot of foreign products have used advertising to quickly establish name recognition.
The long line in front of the new Sogo Department Store testifies to the buying potential of consumers on Taiwan.
With the lowering of tariffs and the fall of the US dollar against the NT dollar, U.S. products have poured into the market at competitive prices.
Pizza chains have come to get a piece of the fast food action.
Beer has become a blue-collar staple beverage; many brands are now available on Taiwan.
Following the rise in personal incomes, foreign investors have already begun to enter the entertainment market.
The costs of doing business in the R.O.C. are low; a lot of foreign products have used advertising to quickly establish name recognition.
The long line in front of the new Sogo Department Store testifies to the buying potential of consumers on Taiwan.
With the lowering of tariffs and the fall of the US dollar against the NT dollar, U.S. products have poured into the market at competitive prices.
Pizza chains have come to get a piece of the fast food action.
Beer has become a blue-collar staple beverage; many brands are now available on Taiwan.
