Taiwan, in its glorious Asian Tiger days, witnessed the launch of the region’s first foreign hypermarket. In 1989, French retailer Carrefour debuted in a modest 3,500 square-metre basement site in Kaohsiung with parking limited to 250 motorcycles, after a fruitless search for a European-standard 10,000 square-metre ground floor site.
Carrefour’s first mover advantage - and willingness to adapt - may explain why, 20 years later, Carrefour Taiwan has 52 stores, and commands half of the island’s hypermarket sales, while a handful of rivals, including RT-Mart, Geant and Costco, bicker over the rest.
But the focus for the global hypermarket operators has long since moved from Taiwan. Between 2003 and 2008, Taiwan registered the region’s lowest growth in hypermarket sales - just seven per cent, according to Euromonitor. Elsewhere the retail revolution is robust. Malaysia registered 313.4 per cent growth in hypermarket sales over that same five-year period, and there were strong showings of 144.5 per cent in the Philippines, 169 per cent in Indonesia and 163.1 per cent in Vietnam.
China is now a key market for the global players. Hypermarkets in China recorded 253.8 per cent sales growth during those five years, and this retail format is atypically dominant. Euromonitor ranked Carrefour, Wal-Mart and Auchan as fifth, sixth and seventh among the country’s top retailers in 2007. Tesco, which launched in China in 2004, might soon join the list as well.
“When we ask consumers why they go to big box retailers, their answer is trust,” says Shaun Rein, managing director, China Market Research Group (CMR). “They believe hypermarkets have better quality control and sell genuine, legitimate products. There is a fear that products sold by mom-and-pop shops are counterfeit, expired or of poor quality.”
This means that hypermarket sales in China are not necessarily as savings-driven as they tend to be the in the West.
“I’m not sure the big box retailers understand this, but here it is the upper middle class and even the rich who shop at hypermarkets,” continues Rein. “That is why Wal-Mart struggles in China. In the US, its strategy is everyday low prices, and it tries to transplant that imagery into China. But Wal-Mart can’t be the cheapest - the mom-and-pop stores are.”
Fiona Miller, senior business analyst at research company IGD, agrees that Wal-Mart relies more heavily on price as a positioning, at least relative to its rivals.
“Wal-Mart tries to appeal to China’s price-conscious consumers through its ‘Rollback’ promotions,” says Miller, “while Carrefour has a strong fresh food offer in produce, meat and food-to-go counters. Tesco has its private labels, having launched its Value range in China in late 2006.”
Every country has its own retail environment, and a unique line-up of winners and losers, says George Svinos, head of retail, Asia-Pacific consumer markets, at KPMG. In Thailand, for example, Tesco is absolutely dominant, with 71 hypermarkets, attaining that lead by acquiring the Makro chain. In Taiwan, in contrast, Tesco withdrew after a few years and traded its stores with Carrefour for properties in Eastern Europe.
“Thailand allows for large footprints and we are talking about more than 2,500 square metres spread over two levels,” says Svinos. “Large footprints are possible in Korea as well, which has the region’s largest hypermarkets, and in China outside of tier-one cities.”
The cost of land makes this impossible in Shanghai, or in markets such as Taiwan or Japan. In these markets, retail is fragmented and convenience stores dominate.
The other obvious Asian candidate for hypermarket expansion is India, but here the global giants may face more hurdles. “Footprint will be an issue, but town planning is difficult in India as well,” says Svinos. “In China, the Government is more proactive about investment, and clearing large tracts of land and building the transportation infrastructure so people can get to a new shopping centre. That is more problematic in India.”
