Mon, Oct 23, 2006 page12

• PXmart maps out big expansion plan

  CHALLENGE The discount chain is planning to have 320 stores nationwide by the end of the year and is targeting urban areas and islets as a focus for the growth

  • By Jackie Lin / STAFF REPORTER
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  Pxmart (全聯社), the nation's biggest "hard discounter" better known as Chuan Lian center (全聯福利中心), has mapped out an aggressive expansion plan to challenge supermarkets, with some hypermarkets also likely to feel the pinch.

  The hard discount chain, aiming to open up to 320 stores nationwide by the end of the year to achieve annual sales of NT$30 billion (US$903.6 million), is putting its new business model of including fresh foodstuffs among the product mix to the test.

  It currently offers fresh food products in more than 20 outlets, including the five Sunmade supermarkets (善美得) taken over this year, said general manager Tsai Chien-ho (蔡建和) at a charity event held on Saturday.

  "To better serve consumers, we think it's important to offer a complete product mix," he said.

  Fresh food is a powerful tool to boost customer traffic. The chain has seen fresh food contributing to around 15 percent of revenues in the 20-strong stores, with one on Taipei's Nanjing E. Road even reporting 30 percent of fresh food sales, chairman Lin Ming-hsiung (林敏雄) said.

  "That store has an advantage of being located in an area with a high population of office workers and no traditional markets nearby," Lin explained.

  This would become the principle on which the firm bases decisions regarding which stores it will introduce fresh food to. Its initial plan will be to stock fresh produce in downtown stores where busy white-collar workers may find it convenient to shop.

  Taking a different approach from hypermarkets where the maxim is "the bigger the better," most Pxmart outlets are between 150 ping (495m2) and 200 ping and situated in inconspicuous areas, especially in second-tier counties and townships, because "we couldn't afford to extra expenditures like high rents and we want to offer the best prices to consumers," Tsai said.

  Its major focus now is to extend its tentacles into urban areas and islets like Kinmen, with a mid-term goal of opening 500 stores by 2010, which Tsai said might be achieved ahead of schedule.

  Many attribute Pxmart's fast expansion to its successful policy of offering hypermarket-level prices on a supermarket-like scale.

  Pxmart was formerly a low-priced grocery chain the government had set up for military personnel, government officials and teachers to buy daily necessities, and special cards were required for entry.

  In late 1998, it was taken over by Yuan Li Construction Co (元利建設) and transformed into a privately owned enterprise, open to the general public.

  The firm's boss, Lin Ming-hsiung, also chairman of Hwatai Bank (華泰銀行), decided to maintain the retailer's status as a discounter that serves as "the community's good neighbor," manifested on its proximity to local neighborhoods and bare-bones interiors and store signs.

  Compared with rivals which have been busy cooperating with credit card issuers, Pxmart bucks the trend and only accepts cash.

  Tsai said banks usually charge handling fees of between 3 percent and 5 percent for card transactions. One time, Pxmart's information section came back with exciting news, saying that some banks agreed to slash down the handling fee to only 1.8 percent.

  Their sense of achievement was quickly deflated when Lin simply waved his hand, saying, "That's not a good idea. We'd just hand over every penny we earn to the banks."

  This shows how minimal the gross margin is, said Richard Yang (楊瑞昌), special assistant to the chairman, adding that their products are on average 10 to 15 percent cheaper than those at hypermarkets.

  Its growth has attracted rivals' attention. In August, the nation's largest hypermarket chain Carrefour for the first time claimed that it will challenge Pxmart after it has 80 mega-sized stores in operation by 2010.

  Carrefour spokesman Allan Tien (田中玉) said that by that time, the retail giant will start opening smaller stores right next to Pxmart's for cut-throat rivalry.

  Faced with Carrefour's confrontation, Lin said they are not afraid of competition as each retailer has its own prowess.

  "We provide the lowest prices anytime, quality products and convenience. Taiwan's hypermarkets and supermarkets all have foreign capital behind them. People should support rarities like us, a 100-percent Taiwanese company," Lin said.
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