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Taiwan's godfather of retail eyes supermarket revolution- Nikkei Asian Review

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src="/web/20160505041741im_/http://asia.nikkei.com/var/site_cache/storage/images/node_43/node_51/2016/201604/0427n/0427n-chuan-lian-taipei/4420920-1-eng-GB/0427N-Chuan-Lian-Taipei_article_main_image.jpg" width="580" alt=""/> <p class="img-caption"> A Chuan Lian supermarket in Taipei. </p> </div> </div> <div class="article-box detail"> <div class="wysiwyg_area"> <div class="articleBodyText"> <p>TAIPEI -- Taiwan's Hsu Chung-jen, credited with bringing convenience stores to the island, now seeks to remake the supermarket industry there, using his deep retail expertise and hints from Japan.</p><div class="object-right"> <div class="object-right fb"> <div class="object-right"> <div class="js_enlarge"> <a href="javascript:%20void(0);" class="mwTrg" alt="zoom_114021"> <div class="image-side"> <img src="https://web.archive.org/web/20160505041741im_/http://asia.nikkei.com/var/site_cache/storage/images/node_43/node_51/2016/201604/0427n/0427n-chuan-lian-hsu/4420681-1-eng-GB/0427N-Chuan-Lian-Hsu_middle_280.jpg" alt="" class=""><p class="date-area img-caption"> Chuan Lian Enterprise CEO Hsu Chung-jen. </p> </div> </a> </div> <div class="modal-zoom" id="zoom_114021"> <a href="javascript:%20void(0);" class="js_close fb">Close</a> <img src="https://web.archive.org/web/20160505041741im_/http://asia.nikkei.com/var/site_cache/storage/images/node_43/node_51/2016/201604/0427n/0427n-chuan-lian-hsu/4420681-1-eng-GB/0427N-Chuan-Lian-Hsu_article_main_image.jpg" alt="" class=""><p class="date-area"> Chuan Lian Enterprise CEO Hsu Chung-jen. </p> </div> </div> </div> </div><p>&nbsp;&nbsp;&nbsp;&nbsp; The father of Taiwan's retail industry in 2014 became CEO of Chuan Lian Enterprise, operator of the island's largest supermarket chain, Pxmart. The company is working to beef up its heretofore scanty presence in urban centers with new stores featuring broader selections of fresh and prepared foods. The company targets 20% growth to 1,000 stores by the end of 2017.</p><div class="page_limit free"></div><div class="page_limit"></div><p>&nbsp;&nbsp;&nbsp;&nbsp; "Convenience stores swept the U.S. and Japan after supermarkets were well established. But the opposite is true in Taiwan," Hsu said. The island's "convenience store industry is extremely mature, comprising over 10,000 locations. But the supermarket sector still has a good deal of room to grow."</p><p><b>Next project</b></p><p>Hsu is largely responsible for setting off Taiwan's convenience store boom. He picked up the basics of the retail trade while studying in Japan in the 1970s. Hsu then returned home, bringing the 7-Eleven convenience store brand to Taiwan as head of President Chain Store. The business veteran now wants to lead a similar revolution in the supermarket industry.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; Chuan Lian found success in the late 2000s using Japanese technology that helps maintain the freshness of food to lure shoppers looking for meat and fresh foods away from Taiwan's traditional marketplaces. But an expanded network of stores began to weigh on growth, prompting the company to turn to Hsu.&nbsp;</p><p>&nbsp; &nbsp; &nbsp;Hsu's first move after coming to&nbsp;Chuan Lian in 2014 was to re-establish the company's strength in fresh foods. Efforts targeting apples, kiwis, bananas and other core products paid off, boosting sagging customer traffic and sluggish fresh-food sales.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; The company's "customer base had changed over time," Hsu said. "Younger generations are used to convenience stores -- they don't shop at traditional markets."</p><p>&nbsp; &nbsp; &nbsp;Taiwan's 800 or so marketplaces have long been at the center of the island's food industry. But closures have grown more common, as have food safety scandals, such as the discovery in 2014 of lard containing waste oil. Pricing at the markets is tough to understand, and sanitation is a concern, a young office worker said.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; Shifting consumer habits are Chuan Lian's chance to succeed, Hsu said. "We plan to focus our marketing efforts on younger shoppers going forward."</p><div class="page_break auto free"></div><div class="page_break auto"></div><p><b>Know your audience</b></p><p>Chuan Lian in 2015 opened a store of around 260 sq. meters in the heart of Taipei. A bakery section and wide selection of prepared dishes aim to bring in wealthy residents and office workers in the area. Such small-format stores are a key element of Chuan Lian's surge into urban centers, which marks a shift in focus away from more rural strongholds.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; Chuan Lian in January shelled out 450 million New Taiwan dollars ($13.9 million) to acquire grocery chain Matsusei, which has a strong urban presence. The chain's 53 stores brought Chuan Lian's total to more than 840 locations, more than three times the size of second-place player Wellcome's Taiwanese network.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; "The problems we now face are logistical -- how to efficiently distribute products to stores as lineups change with the opening of smaller stores," Hsu said. Taiwanese supermarkets typically receive product shipments directly from manufacturers through third-party logistics services. But Hsu looks to use his previous experience to create a more efficient framework, building a network of logistics centers and introducing information systems to manage distribution.</p><p><b>Learning from others</b></p><p>Floor layouts, management techniques and other elements of Japanese markets have been useful models for Chuan Lian, Hsu said. The atmosphere at "Ito-Yokado, for example, resembles a lively marketplace," he said, praising the in-person sales counter experience at outlets of the <a href="/web/20160505041741/http://asia.nikkei.com/Company/063DPQ-E" target="_self" alt="063DPQ-E" class="mwMoTrg">Seven &amp; i Holdings</a> unit.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; Chuan Lian has begun to switch out its stores' selections of vegetables, fish and other products seasonally -- a relatively new phenomenon in Taiwan. Sales have increased 10-15%, depending on the day, Hsu said. Stacks of washed vegetables and other characteristic touches, meanwhile, give the stores an atmosphere reminiscent of Taiwan's markets.</p><p>&nbsp;&nbsp;&nbsp;&nbsp; "Taiwan has its own way of doing things," Hsu said. Megamarts like those developed by France's Carrefour "aren't particularly well-suited to an aging and shrinking society," he said. "People no longer need to buy in bulk."</p><p>&nbsp;&nbsp;&nbsp;&nbsp; Chuan Lian targets NT$200 billion in sales by 2020 -- more than double 2015's figure. Meeting that goal rests on the company's ability to realize Hsu's vision of a modern distribution system. Such a framework could even breathe new life into Taiwan's decelerating economy.</p> </div> </div> <div id="modal-screen_zoom"></div> </div> <div id="063DPQ-E" class="cmp-smy-balloon"> <div class="cmp-smy-balloon-inr"> <h3 class="mwmo-title"><a href="/web/20160505041741/http://asia.nikkei.com/Company/063DPQ-E">Seven &amp; I Holdings Co., Ltd.</a></h3> <p class="a300ctry">Japan</p> <table> <tr> <th>Market(Ticker):</th> <td>TKS(3382)</td> </tr> <tr> <th>Sector:<br>Industry:</th> <td>Retail Trade<br>Food Retail</td> </tr> <tr> <th>Market cap(USD):</th> <td>36,900.41M</td> </tr> <tr> <th>Shares:</th> <td>886.44M</td> </tr> </table> <div class="more"> <a href="/web/20160505041741/http://asia.nikkei.com/Company/063DPQ-E">about Seven &amp; I Holdings Co., Ltd.</a> </div> </div> </div> <!-- balloon --> <div class="pagination no-border"></div> <div class="related-company"> <h2 class="related-header">Related companies</h2> <p class="company-list"> <a href="/web/20160505041741/http://asia.nikkei.com/Company/063DPQ-E">Seven &amp; 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