Before every Chinese New Year, the working masses carefully slip their year-end bonuses into their pockets and try valiantly to resist the ubiquitous sales that flood consumer land. The consumer crunch is in full swing once again in the R.O.C., as advertisers find willing targets on literally every corner of the island. If department stores are prime beneficiaries of this annual display of conspicuous consumption, then they are also becoming victims of their own success.
Department stores in Taipei are caught in a retailing guerrilla war that forces the combatants to offer "sales" 240 shopping days out of the year.
The happy holiday horde is more than willing to put up with the crowds, noise, and street-market-like hawking for a chance to snatch up a real bargain. "Limited time only," blares the loudspeaker. "Just $299 in the toy department," it assures us for the third time in the last ten minutes. But is it really the buying frenzy it seems? Perhaps not.
What's interesting is that according to a recent survey by the United Daily News Information Center, a surprising 30 percent of Taipei consumers don't believe that department stores actually lower prices during "sales." Another 50 percent are somewhat suspicious, and a miniscule 13 percent believe that there are indeed bargains to be had. It appears that despite the waves of people, purchases are coming in drops.
In 1985, Taipei's 17 major department stores rang up total sales of NT$12 billion. One year later, 18 retailing houses shared a meager NT$11.8 billion. The decline in sales was the first since the premier department store in Taipei opened its doors in 1932. Near the end of last year (1987), the Japanese chain SOGO entered the already crowded field with a 10-story behemoth--their largest store to date. Are they marching to a different drummer, or do they hear an orchestra that we can't?
Department stores in Taiwan, said Tsai Neng-kun, general manager of Today's Department Store, are basically purveyors of women's fashion--a market that is precisely the target of the many boutiques that have sprouted up in the last five or six years in Taipei and which have seriously cut into the domain of the department stores.
According to retailing experts, a large department store needs a population of around 300,000 to support it. Taipei and the surrounding suburbs together account for a four-million-person base, on which 20-some department stores and countless smaller retailers rest their profit hopes. The future would seem to be uncertain to say the least.
But they continue to come. Chung Shing Textile recently bought the Sunrise Department Store for a surprisingly cool NT$600 million. San Yang--the auto company-picked up the Lai Lai's Taipei and Taicheng stores for a staggering NT$1.28 billion. President Foods' joint venture with a French partner has already been approved by the Investment Commission of the Ministry of Economic Affairs. The list goes on. . . . Is it the lemming mentality of retailing?
The robust economy and the government's reforms to ease the restraints that have been holding it back have convinced foreign firms that the time has arrived for investing on Taiwan. The list of foreign retailers interested and indeed actively searching for local partners reads like a who's who of international retailing--American, Dutch, French, and English.
But the old guard isn't packing in and leaving town in face of this foreign avalanche of competition. Lending credence to the maxim "If you can't beat 'em join 'em," Taiwan's established department stores have been going after fresh funds from abroad themselves--in the form of Japanese cooperation.
Today's Department Store raised NT$340 million over the last two years, joined forces with Seibu, and completely renovated its store on Nanking W. Road. The formula has been followed by Evergreen, Far East, and other local department stores.
"The local market's potential is still largely untapped," said Jerry Lin, assistant general manager for Sunrisc Department Store. Compared to the Japanese market, where 20 to 30 percent of consumers' spending is done in department stores, he explained, Taiwan's consumers spend only 6 to 7 percent.
Another reason for the local industry's bounding optimism is the tendency for all department stores on Taiwan to have a tenant-landlord relationship. The owner simply rents out space to retailers and collects rent. The result is that most stores end up looking the same and offering many of the same products. There is still more room for specialized stores with more defined markets, said Yun Pei-chen, Honey Department Store's assistant general manager. In other advanced countries there are distinct market segments--discount, high fashion, designer, and so forth--which have their own stores and do not necessarily compete directly with each other.
The local market's abundance of land-lord-tenant agreements has insulated the landlord from much of the ups and downs of the business cycle, but has also hampered the efforts of stores to establish an individual character or name identity. It's a formula that won't last much longer. Increased buying power and a growing demand by consumers for choice will force retailers to be different and selective in their marketing approach. The R.O.C. is entering the era of differentiated market segments.
An area of price competition where the large foreign department store has a very definite advantage over local stores is in purchasing policy. A chain like SOGO can purchase in mass quantities for all 20 of its stores, enjoying tremendous savings in the process. That is one of the reasons why local stores have to cooperate with large foreign chain stores to obtain the economies of scale that the relatively small Taiwan market cannot offer.
Department stores will also have to offer more "departments" in the future to attract the crowds that are needed for economic survival. Women's fashion has been the mainstay of the industry from the opening of the first store. The stores of the future will have to offer fashions for the whole family, furniture, stationery, cosmetics, and even coffee shops and optical departments.
Another reason why there are so many new competitors in an already intensely competitive industry is the coming Mass Rapid Transit System. When the system is completed in 12 years it will connect all the residents of the outer suburbs into the greater Taipei commuter network. The vastly greater flow of people (consumers) in and out of Taipei every day will be a windfall for businesses in the city center.
The planned entrances to the subway will be gold mines to any business in the vicinity. The new SOGO store location was picked precisely for that reason. Conversely, the stations in the outer suburbs will also be candidates for the establishment of upper-end retail outlets, because of the increased traffic flow.
The changes in the purchasing patterns of the R.O.C. are evolving in the same way as R.O.C. businesses. Higher quality, more choice, and hopefully more satisfaction will be the result.
[Picture Caption]
Busy pedestrians still have time to examine the array of articles available in a department store.
Do pleasant surroundings and discounts make a difference?
Furniture departments are turning newfound profits.
Women of Taiwan revel in the bounty of famous brand cosmetics now sold on the island.
Men are becoming more conscious of their appearance as department stores become more conscious of their wallets.
Large department stores can stimulate the economy of the surrounding area.
The persistent crowds reflect the great potential growth for department stores in the R.O.C.
Taking a break from the hectic pace of window-shopping at a conveniently located coffee house.
Do pleasant surroundings and discounts make a difference?
Furniture departments are turning newfound profits.
Women of Taiwan revel in the bounty of famous brand cosmetics now sold on the island.
Men are becoming more conscious of their appearance as department stores become more conscious of their wallets.
Taking a break from the hectic pace of window-shopping at a conveniently located coffee house.
Large department stores can stimulate the economy of the surrounding area.
The persistent crowds reflect the great potential growth for department stores in the R.O.C.
