Taiwan's economy fared poorly last year. For eight months the economy was in the doldrums, and overall economic growth for the year was a mere 0.85 percent, setting a record low since 2009, following the global economic crisis.

The retail and services industry also caught a case of the blues. Of the 650 ranked corporations, the number recording declining revenues increased from 183 in 2014 to 284 last year, or nearly 43.7 percent.

A full half of the familiar faces in the top 10 enterprises recorded diminished revenues. Most notably, after three consecutive years ranked second, ASUS Computer surrendered its position to semiconductor parts and components distributor WPG Holdings. WPG exceeded NT$500 billion in revenue last year, recording 13.9 percent annual growth on the way to capturing the top rank.

Tourism Industry out of Doldrums

The numbers also show that, in spite of an overall sluggish economy, some members of the service industry are succeeding in overcoming the situation. Average profitability among the top-ranked service industry enterprises last year was eight percent, a slight uptick over the previous year's 7.9 percent. Meanwhile, the total net profit reached NT$419.37 billion, climbing 13.6% over that of 2014.

Some businesses have profited handsomely from changes in the overall environment. Last year, inbound and outbound travelers to and from Taiwan each exceeded 10 million people, helping tourism industry operators achieve profitability amid a poor economic climate. Major travel agencies such as Lion Travel, SET Tour, and Lifetour recorded annual revenue gains of over 18 percent last year.

In addition to cheaper flights due to the continual drop in oil prices worldwide, an increase in the number of long weekends and extended holidays in Taiwan combined with the depreciation of the Japanese yen have increased the popularity of Japanese tourism among domestic travelers and driven flourishing business for tour operators, offers Jason Chen, Investment Department Portfolio Manager at First Securities Investment Trust.

According to statistics from the Taiwan Tourism Bureau, the number of Taiwanese tourists traveling to Japan increased by nearly 30 percent last year over 2014.

The service industry is also trying to break through the economic slump, constantly adding new services in an attempt to retain customers.

E-commerce Out-Sprints All Comers

Items are delivered right to your home with just a few taps at a keyboard or swipes on a mobile phone. The convenience of shopping has driven the steady year-on-year growth of e-commerce, becoming the service industry's main focus in recent years. Last year, the domestic capital market added the Kuo Brothers and Gomaji, two robust forces, indicating how hot e-commerce continues to be.

Two heavyweights of the domestic e-commerce realm, Fubon Multimedia Technology Co. (known by the brand name "Momo") and PChome, have enjoyed a long period of stable growth after having gotten an early start, yet they continue to hold fast to their core values to retain consumers. Three of Momo's shopping apps tallied 2.5 million downloads last year. As for PChome, in addition to offering 1.7 million products, it boasts a tremendous 99.5 percent success rate in delivering items within 24 hours anywhere in Taiwan. If that were not enough, it also introduced a lightning delivery service option for customers to receive orders within six hours of checkout. Such successful endeavors have helped PChome steadily increase revenues, climbing all the way from 107th place in 2011 to number 64 in the service industry category.

A major facilitator of the e-commerce wave, and one that "goes the last mile" to make it possible, is the logistics industry. As Jason Ke, audit partner of Deloitte & Touche Taipei, relates: "E-commerce's reliance on logistics' rapid delivery has changed consumers' habits of spending at brick and mortar outlets. I think there is still considerable momentum left for the logistics industry."

For instance, HCT Logistics, Takkyabun, and Kerry Logistics continue to achieve revenue growth year after year. Keen on the fresh produce market and the rise of China-based online retailers such as Taobao and Tmall, logistics companies have continued to refine their facilities over the last year, moving toward such professionalized services as cold chain logistics and cross-border logistics.

Physical Outlets Offer Diverse Experiences

Electronic commerce seeks to capture consumers with quick action, while brick and mortar retailers appeal to customers with a variety of shopping experiences.

Last year Pxmart, which accounted for a huge portion of Taiwan's retail business, concentrated on fresh produce, while retailer POYA has thrown its weight behind cosmetics and daily care items. Both outfits recorded over 11% revenue growth last year to lead the retail field, unfazed by the e-commerce onslaught. In fact, Pxmart even broke into the top-20 service industry rankings, placing 19th.

Ke observes that the two major retail channels have been aggressively expanding store locations as well as constantly updating store configurations to create new consumer experiences. For instance, Pxmart unveiled a bread section and coffee service, while POYA established a free makeup trial section.

The FamilyMart convenience store chain has also brought out new store configurations, offering not only expanded space, but also such hot food selections as waffles and donuts to increase the time customers spend visiting. The chain even entered a cross-industry cooperative arrangement with Great Tree Pharmacy to establish a "pharmacy convenience store" specifically targeted at capturing the elderly market.

FamilyMart chairman and CEO Yeh Jung-ting observes that the distinctions between different retailers are continually blurring, which further shows why brick and mortar retail channels are following the trend of cross-industry consolidation to satisfy customers' demand for diverse retail experiences.

In addition, as Taiwan is an aging society with growing health consciousness, business interests are aggressively targeting the new medical and health services market. Such companies as Great Tree and health food specialist Pro-Partner each achieved double-digit growth last year. In order to reflect the strength of this health trend, this year's CommonWealth top 2000 listed corporations has been augmented to include this new category.

Translated from the Chinese by David Toman

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