Convenience stores continue break-neck expansion

This article was published by the Taiwan Headlines on May 19, 2006. It reports that in the first quarter of 2006, Taiwan's five major convenience store chains added 275 new outlets. President 7-Eleven alone set up 153 new outlets, which was 28.6 percent more than the 122 new stores it opened during the same period in 2005. This fast growth rate makes President 7-Eleven a considerable threat to its rivals in the market.

Like many other industries, major retail stores in Taiwan were affected by the cash- and credit-card debt problem in the first quarter of 2006. However, convenience stores, which focus on cash transactions, managed to put up exceptional performance. For example, President 7-Eleven saw its sales grow 14.57 percent in the first quarter of 2006, thanks largely to its new outlets.

According to President 7-Eleven, the chain implemented a number of new franchise measures in the fourth quarter of 2005. The effects of these measures became evident in the first quarter of 2006. Meanwhile, in 2006, President 7-Eleven will also provide new strategic subsidies for its stores in the greater Taipei area. New welfare measures will also be offered to all the owners of its stores, including subsidies for travel and the purchase of autos.

In 2005, President 7-Eleven launched a "Hello Kitty" marketing campaign, which enabled the chain to achieve a record performance in both revenues and profits. More significantly, the successful campaign boosted the confidence of franchise operators in the effectiveness of the chain's marketing strategy. In 2006, President 7-Eleven plans to continue the "Hello Kitty" campaign as well as other promotional activities.

As of April 26, 2006, President 7-Eleven had a total of 4,179 outlets around Taiwan, 82 percent of which were franchise stores. The chain aims to heighten the ratio of franchise stores to 85 percent to 90 percent in 2006.

In contrast, FamilyMart, the second-largest convenience store chain in Taiwan, appears to be suffering from President 7-Eleven's aggressive expansion. The chain opened only 33 new outlets in the first quarter of 2006. According to FamilyMart, its strategy in 2006 is to strengthen the operation of existing outlets and to select good locations for new stores. It expects to open 150 new outlets in 2006.

Finally, in the first quarter of 2006, the Hi Life convenience store chain added 46 new outlets, while the OK chain opened 31 new outlets. Hi Life once concentrated on the opening of new outlets in the second half of every year, but it is now opening new outlets in the first half as well. The OK chain is also busy opening new outlets, and has lowered its franchise fee to NT$50,000 (US$1,570) in 2006. As a result, the number of participants in its franchise presentations has increased to an average of 40, up from 15 previously.