While high-end retailers gets hit by the economic downturn, some mass merchandisers have been swimming against the tide by reporting record high sales thanks to their low-price high-volume strategies.
Costco President Taiwan Inc (台灣好市多), the local operator of the US warehouse-club chain, saw its sales grow 21 percent last month from a year earlier, following increases of 46 percent and 37 percent in October and September respectively, Ahmen Lee (李伯孟), regional marketing manager at Costco Taiwan, said in an interview last week.
Excluding four newly opened stores in Taichung, Taipei and Kaohsiung, Costco Taiwan’s sales in the three months to last month were up by 15 percent to 16 percent from a year earlier, Lee said.
PHOTO: CHEN PIN-CHU, TAIPEI TIMES
“Top-end customers, who did not frequent Costco Taiwan as much in the past, are now increasing their visits in a bid to save costs amid the weakening economic conditions,” Lee said.
Hard discounter Chuan Lian Center (全聯福利中心) is also expected to see revenue increase 10 percent to 15 percent this year from last year, despite the tainted milk powder scandal that had temporarily hampered its sales in September, the company’s general manager Tsai Chien-ho (蔡建和) said.
Excluding newly opened stores, same-store sales grew by 5 percent year-on-year, he said.
While some retailers have suspended expansion plans or even decided to call it quits in response to this harsh business environment, companies that advertise their low prices like Chuan Lian have decided to buck the unfavorable trend.
“We plan to open new outlets closer to where consumers live, in a bid to help them save transportation costs amid difficult times,” Tsai said.
The company plans to add 65 new outlets to expand its network to 440 nationwide, and increase annual sales to between NT$42 billion (US$1.26 billion) and NT$43 billion, he said.
By the end of next year, “Chuan Lian plans to expand its outlets to more than 500 on an annual sales target of NT$50 billion,” Tsai said.
Both Lee and Tsai made their remarks after the local representatives of the US gourmet food store Dean & DeLuca said on Thursday that the store has seen declining sales in recent months, amid market speculation that the upscale store was considering leaving Taiwan next month.
The less-than-expected domestic consumer spending has dampened retailers’ revenues, as consumer confidence fell to its lowest level in nearly eight years last month.
Dean & DeLuca is not alone in suffering from falling sales in Taiwan. The top UK retailer Marks & Spencer Group Plc announced in July it would withdraw from the market, less than 18 months after its entrance, while Sunrise Department Store (中興百貨) ended its 23-year operation in Taipei at the end of that same month.
Sales from retailers are important because the figures represent an indication of real private consumption, and because the government has pinned it’s hope on consumer spending to support the slumping economy in light of plunging exports.
But the combination of the credit crunch, the falling equity markets and the dismal economic outlook has forced retail sales to post five consecutive months of contraction since June. The sales dropped 3.75 percent year-on-year in October to NT$271.7 billion, the Ministry of Economic Affairs’ tallies showed on Nov. 24.
“The next catalyst for domestic consumption will be the release of consumption coupons in January/February,” Andre Chang (張致竑), a Taipei-based analyst at Citigroup Global Markets, said in a client note dated on Thursday.
Last week, the Cabinet approved a special budget bill that enables it to spend a total of NT$85.7 billion by distributing shopping vouchers to the public in a bid to stimulate domestic consumption.
Dissemination of the vouchers will start on Jan. 18 and citizens need to spend their vouchers (NT$3,600 per person) no later than the end of next September.
“Some short-term push may be expected, but a structural recovery may still need to wait until the second half of next year or later,” Chang said.
The NT$85.7 billion spending accounts for around 1.1 percent of annual consumption or 2.5 percent of retail sales in Taiwan’s economy, an estimate by Merrill Lynch showed.
However, Merrill Lynch’s Hong Kong-based economist Arthur Woo said last week that the anticipated stimulus effect would be “very limited” given Japan’s prior experience in 1999, when Japanese consumers ended up using the coupon to buy items they had planned for and save up the money that should be spent.
The Cabinet expects 95 percent of the vouchers will be spent, but Tine Olsen, a Sydney-based economist at Moody’s Economy.com, believes the measure won’t have a long-lasting effect on the economy apart from pushing up prices.
“The vouchers are unlikely to turn consumer sentiment around,” Olsen wrote in a report.
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
China’s economic planning agency yesterday outlined details of measures aimed at boosting the economy, but refrained from major spending initiatives. The piecemeal nature of the plans announced yesterday appeared to disappoint investors who were hoping for bolder moves, and the Shanghai Composite Index gave up a 10 percent initial gain as markets reopened after a weeklong holiday to end 4.59 percent higher, while Hong Kong’s Hang Seng Index dived 9.41 percent. Chinese National Development and Reform Commission Chairman Zheng Shanjie (鄭珊潔) said the government would frontload 100 billion yuan (US$14.2 billion) in spending from the government’s budget for next year in addition
Sales RecORD: Hon Hai’s consolidated sales rose by about 20 percent last quarter, while Largan, another Apple supplier, saw quarterly sales increase by 17 percent IPhone assembler Hon Hai Precision Industry Co (鴻海精密) on Saturday reported its highest-ever quarterly sales for the third quarter on the back of solid global demand for artificial intelligence (AI) servers. Hon Hai, also known as Foxconn Technology Group (富士康科技集團) globally, said it posted NT$1.85 trillion (US$57.93 billion) in consolidated sales in the July-to-September quarter, up 19.46 percent from the previous quarter and up 20.15 percent from a year earlier. The figure beat the previous third-quarter high of NT$1.74 trillion recorded in 2022, company data showed. Due to rising demand for AI, Hon Hai said its cloud and networking division enjoyed strong sales
Protectionism: US trade chief Katherine Tai said the hikes would help to counter unfair trade practices from China, while boosting domestic clean energy investments US Trade Representative Katherine Tai (戴琪) defended stiff tariff hikes against countries such as China, saying that paired with investment, they were a “legitimate and constructive” tool for reinvigorating domestic industries. Tai’s comments come a week after sharp tariff increases on Chinese electric vehicles (EVs), EV batteries and solar cells took effect — with levies down the line on other products also recently finalized. The latest moves targeting US$18 billion in Chinese goods come weeks before next month’s US presidential election, with Democrats and Republicans pushing a hard line on China as competition between Washington and Beijing intensifies. In an interview on Thursday