cwlogo

切換側邊選單 切換搜尋選單

Top 500 Service Enterprises

Domestic Demand Heats Up

精華簡文

Domestic Demand Heats Up

Source:cw

Taiwan's domestic demand-driven industries are flourishing, but people's complaints about rising prices are growing louder too. How can the service industry respond to these trends and continue to attract customers?

Views

99+

Domestic Demand Heats Up

By Ming-Ling Hsieh
From CommonWealth Magazine (vol. 496 )

In 2011 consumer-oriented service enterprises dominated the CommonWealth Magazine survey of Top 500 Service Enterprises. Industries satisfying the necessities of life and lifestyle desires – food, shelter, clothing, transportation, education, communication, leisure and entertainment – shone with stellar performance. In the Taiwanese market buying power has been booming, undeterred by the European bond crisis and the specter of another economic slump.

The service industry Top Ten saw no dramatic changes (Table 1), but computer giant Acer lost its top spot after nine months of restructuring, slipping to third place. Electronics distributor WPG Holdings, for its part, benefitted from synergies and strong growth following the acquisition of Wintek Technology in 2011, moving up two spots to number five.

Hospitality and Transportation Post Fast Growth

The tourism and hospitality industries turned in the best report cards in 2011.

Average growth in these two industries exceeded 34 percent last year. The fifty fastest-growing service enterprises included chain restaurant operators such as New Palace International Co. Ltd.; the Wowprime Group, best known for its Wang Steak steakhouses; and Gourmet Master Co. Ltd, which owns the 85 Degrees coffeeshop chain.

"(Per capita) national income of US$20,000 is a watershed, because dining, drinking and enjoying coffee have become means of social interaction. They have become part of people's lives," notes Steve Day, president of the Wowprime Group.

In mid-April the Wowprime Group invited senior staff and management to Kenting for a "family gathering," the first such meeting since the company listed on the main board of the Taiwan Stock Exchange in March. More than 1,500 people, including the cooks of Wowprime's 11 chain restaurants and employees at restaurant manager level and above with their families, were shipped to the seaside resort in 45 tour buses for a lavish party.

Marked growth was also registered by passenger transport companies and car dealers.

While profit margins narrowed last year, turnover grew by an average of 36.83 percent for the six major transport services, including the Taiwan High Speed Railway Co. (THSRC), Taipei Rapid Transit Corporation (Taipei Metro), and highway bus operators Kuo-Kuang Motor Transportation Co. Ltd., United Highway Bus Co. Ltd. (U-Bus), and Metropolitan Transport Corporation.

Among these, THSRC stood out with a particularly good track record. The company, which has long been saddled with fiscal problems, began to see light at the end of the tunnel last year. As revenue increased by more than 16 percent, the company began to turn a profit in the first half of the year. However, the bullet train operator still has to shoulder accumulated losses of more than NT$67 billion.

Taiwan's car market has also matured. The car sales and maintenance industries boosted their average revenue by more than 15 percent last year. The number of new car registrations reached a six-year high in 2011, according to statistics by the Ministry of Transportation and Communications.

Hotai Motor Co. Ltd., which has been the island's leading car vendor for the past decade, was hard hit in the first half of the year when the massive earthquake-tsunami disaster in Japan interrupted its supply chain. However, sales quickly picked up in the second half of the year with almost 120,000 Toyota automobiles being registered, a seven-year high.

Hotai officials note that the surge in new car registrations last year was the major growth driver in the automobile market. The buying spree was not caused by first-time car buyers, but by drivers who traded their old cars in for new ones. Presently some 3 million vehicles in Taiwan are 10 years or older.

Strong Momentum for Department Store Retail, Leasing Industries

Department store and retail businesses also found some new bright spots.

The two leading convenience store chains, President Chain Store Corp. and Taiwan Family Mart Co. Ltd., registered growth rates above 10 percent.

While the department store companies are fighting a fierce retail war, rankings have not changed much, although the Breeze Center shopping mall emerged as a dark horse. The average department store usually posts revenue growth between 4 percent and 6 percent, but Breeze Development Co. Ltd., the center's owner, has achieved double-digit revenue growth for two years in a row.

The revenue of Breeze Center, which was launched 10 years ago, last year topped NT$10 billion for the first time. Breeze Development has made a number of moves to expand its territory, first by getting its hands on the hotly contested A3 Zone in Taipei's Xinyi District, then by buying a 60-percent stake in Milan-based fashion brand Giuliano Fujiwara. In its latest coup, the company remodeled the lobby and basement of the Taipei Railway station, adding a substantial amount of retail space.

Henry Liao, executive director of Breeze Development, once said "I want to rewrite the rules of the shopping mall game." When Liao entered the department store business 11 years ago, he was widely ridiculed as a greenhorn with no industry knowledge. Now this outsider has won himself great respect from industry peers.

Jumping on the bandwagon of the service industry boom and economic recovery, the machinery equipment and equipment leasing industries also gained ample momentum, posting average revenue growth of almost 20 percent.

Kevin Liao, senior vice president of Chailease Holding Co. Ltd., observes that the major reason for accelerated growth is that most industries, having overcome the aftermath of the 2009 financial crisis, have begun to increase their investment in equipment.

Another key growth driver is selecting mainstream markets with high growth, Liao points out.

That's what Chailease Holding has been doing over the past two years: Liao cites as examples the energy-saving industry and domestic demand-driven industries that deliver "happiness," such as the restaurant and hotel industries. Chailease markets energy-saving equipment to hot spring hotels, which need to keep large amounts of water hot, while also continuously air-conditioning rooms. The company also promotes energy-saving lighting solutions for large retail spaces.

Liao contends, "Different businesses in the leasing industry will discover different new business opportunities." He argues that while the macroeconomic environment plays a more decisive role, "you still need to participate in certain high-growth industries if you want to perform better than the big environment."

Revenue of Online Vendors, Communications Providers Soars

What deserves attention is that while brick-and-mortar distribution channels are still growing, virtual vendors are growing even faster.

The leading shopping portals PChome Online Inc. and books.com.tw posted growth in excess of 20 percent. PChome Online's growth even approached 30 percent.

Amanda Chen, head of marketing at Yahoo Taiwan E-Commerce Group, believes that online vendors have a price advantage over real world vendors and offer the convenience of shopping anytime and anywhere.

Especially with the introduction of mobile device-based shopping apps, which began soaring in popularity last year, consumers can now easily buy online whenever and wherever they feel like it. Since Yahoo Taiwan released a mobile phone shopping platform two years ago, sales via handsets have increased to between 1 and 2 percent of the website's overall e-commerce turnover. But not only sales volume is on the rise. Consumers are ordering an ever broader array of products online.

As Chen points out, in the early stages of online shopping, Taiwanese consumers tended to buy fashion items such as clothing and shoes. Later on, consumers came to expect better deals for electronics products online than if buying at popular bargain electronics markets such as Guanghua Market in downtown Taipei.

Now consumers even buy daily necessities such as toilet paper, shampoo or snacks online.

"Consumer demand is gradually shifting away from brick and mortar stores. (Online vendors) are able to satisfy every need," Chen enthuses.

Telecommunications service providers in particular have been able to cash in on the surge in mobile computing. Taiwan Ratings Corp. analyst Shirly Kuo points out that the combined revenue of the three largest telecommunications companies – Chunghwa Telecom Co. Ltd., Taiwan Mobile Co. Ltd. and FarEasTone Telecommunications Co. – grew 41 percent last year.

Correspondingly, average revenue growth in the telecom industry doubled from 3.89 percent in 2010 to 7.45 percent in 2011.

In contrast to the flourishing telecom companies and virtual distributors, traditional brick and mortar industries such as publishing, printing and bookstores saw their average revenue growth contract some 5 percent.

And while the service industry sparkles in many areas, there are also alarming signs amid all the rosy prospects. The ratio of companies with positive revenue growth versus those with negative revenue growth has worsened from 8:2 two years ago to 7:3 last year.

On top of that, profitability in the service industry declined from 2010 to 2011. Total net income shrank by almost NT$100 billion, while the average profit margin stood at just 3.1 percent, down 1.1 percentage points from the previous year. (Table 2)

In contrast to the manufacturing industry, the service industry feels customer response directly and immediately. Disgruntled customers can switch to another service provider whenever they see fit.

Particularly now that many people lament rising commodity prices that push up the cost of living, companies need to understand how to provide value, or else they won't be able to retain old customers and attract new ones.

Industry veteran Hsu Chung-jen, president of President Chain Store, gets exactly to the point: "Cheap is not necessarily what people want. What everyone wants is to get more than what they paid for." That's the never-changing golden rule of the service industry.

Translated from the Chinese by Susanne Ganz


Keywords:

好友人數