Heating Up the Drugstore War
The Taiwanese love affair with all things Japanese has spread to the drugstore market, where Japan Medical is heating up the fray with health products and cosmetics once completely unavailable on Taiwan's shelves.
Heating Up the Drugstore WarBy Margaret Pai
From CommonWealth Magazine (vol. 524 )
It is 8:30 p.m. in the B1 food court of Taipei's Shin Kong Mitsukoshi department store. More than 50 people are standing in line at Marugame Seimen, a noodle restaurant chain from Kagawa Prefecture on Shikoku, the smallest of Japan's four main islands. Waiting customers keep snapping photos of the open-plan kitchen before grabbing a tray to carry away their steaming, freshly cooked udon noodle dishes.
Marugame Seimen, Japan's largest udon noodle chain store, opened its first directly managed outlet in Taiwan in May. The shop sells more than 1,000 bowls of udon noodles per day, posting sales that come in second only behind the outlet in Hawaii.
Japan's food and beverage industry is assaulting the Taiwanese market, since Japanese restaurant chains use Taiwan as their testing ground before tackling other ethnic Chinese markets.
Aside from the food and beverage industry, other Japanese service industry champions have discovered Taiwan as a competitive battleground. The latest assault is taking place in the drugs and cosmetics sector.
Inside a Japan Medical shop, customers feel like they have been spirited away to Japan. The store, which almost exclusively sells Japanese products, even announces "super cheap" discounts on signs written in Japanese. On the shelves, customers find traditional Japanese brands such as collagen powder from a 150-year-old pharmaceutical maker in Kyoto and distinctly Japanese products such as Hello Kitty gummy candies and shampoo with horse fat and kelp.
The drugstore's general manager Masatatsu Wu is introducing Taiwan's consumers to popular Japanese drugs and cosmetics that are a "must buy" for tourists on trips to Japan. Within just 18 months, Wu's drugstore chain has expanded to ten outlets in the Taipei area, which posted revenue worth NT$200 million last year.
Instead of competing head-to-head with Watson's and Cosmed, two large players in the Taiwanese market, Wu's blue ocean strategy is competitive differentiation, setting his drugstore apart from the rest. More than 30 percent of the drugstore's product line-up is over-the-counter drugs. As much as 90 percent of its products are made in Japan. Moreover, about 30 percent of the product range are exclusively sold at Japan Medical and not available elsewhere.
Wu saw his business opportunity in Taiwanese consumers' faith in Japanese products. "Taiwanese consumers place great trust in the quality of Japanese drugs, and Japanese cosmetics are very attractive for their packaging and efficacy," explains Wu.
The dark-skinned, small-statured Wu speaks with a reserved manner that would not be out of place in Japan. The 40-year-old originally worked as an R&D engineer for a Japanese electronics company and subsequently a Taiwanese electronics company.
While studying in Japan, Wu came up with the idea of bringing Japanese drugs and cosmetics to Taiwan. For one thing, members of the older generation in his family were already doing business with Japanese companies. In addition, Wu often received requests from friends and family to buy pharmacy products in Japan and bring them back to Taiwan. He smelled a business opportunity. After evaluating market demand, he went into full gear.
But as it turned out, competition from local drugstores was not as much of an issue as gaining exclusive distribution rights for Japanese star products.
Early last year, Wu contacted the traditional Kyoto-based brand Nakamurakouso, because online customers had been inquiring about the company's famed collagen powder. But at first, the tradition-steeped company, which values long-standing personal relationships, was not willing to give distribution rights to Wu, a stranger.
After exchanging more than a dozen e-mail messages, Wu enlisted the help of a Japanese friend, who does business in drugs and cosmetics, as well as his older relatives with business connections in Japan.
Wu also personally flew to Japan to negotiate distribution rights with Nakamurakouso. He showed them that 1,000 new customers had become Japan Medical members every month and that his chain of six stores was continually expanding.
Eventually the traditional Japanese brand maker, which never advertised its products, was impressed by Wu's persistence and enthusiasm, giving him the nod to try distributing their products in Taiwan.
Finding the right products is the key of Wu's success.
Wu used the Japan Medical fan page to figure out which products consumers want. He also cooperated with a Japanese drugstore chain to bring their most popular products to Taiwan, synchronizing consumer trends in Taipei and Tokyo.
Ms. Chang, an office worker, says she finds Japanese products fresh and interesting. A cooling, wet paper towel that is large enough to rub down the whole body, for instance, can't be found in Taiwan. Taiwanese consumers are attracted by Japanese products so much because the Japanese are known to be conscientious and to produce good quality.
Eager to create an authentic Japanese ambience, Wu deliberately copied the interior design and product display of Japanese drugstores.
When stepping into a Japan Medical outlet, wall mounted display cases filled with over-the-counter drugs catch the eye. These are clearly different from the display cases in most Taiwanese drugstores. "A 90 cm wall-mounted case takes up a person's full visual range, and it's also more eye-catching," Wu explains, gesturing as he neatly positions items in the case.
Wu also adopted the Japanese drugstore approach of displaying products based on a theme. The store offers a collection of more than 30 different types of toothbrushes for children and adults as well as for people with specific oral hygiene problems such as periodontal disease.
"Japanese drugstores are definitely attractive to Taiwanese consumers. But whether they can retain their customers depends on whether they are able to replicate the elements such as the product mix, service quality and store atmosphere to achieve a 'just like in Japan' effect," comments Cosmed marketing division manager Eva Lai.
Japan Medical introduces about a dozen new products per month to keep pace with the latest Japanese trends. With the addition of this new contender, the Taiwanese drugstore war is decidedly getting hotter.
Translated from the Chinese by Susanne Ganz