Two very different types of chain operations in Taiwan began under similar circumstances. Both Fine Collection and Cardtek launched traditional businesses in crowded markets, and both have had to be innovative to emerge as industry leaders in their respective sectors.
In a retail market where one store sells items that are similar to those sold next door, the key to survival, and success, is differentiation. Creating a brand or image that consumers can immediately identify is even more important in the operation of chain organizations, which require a certain amount of uniformity in products and services. Fine Collection Corp., a home furnishing and lifestyle products retailer, and Cardtek Digital Technology Group, the operator of a chain of bookstores and Internet cafes, have not only carved out a niche for themselves in a highly competitive environment but also introduced a few novel approaches along the way.
Four years ago, Lo Hsiao-chieh started working for Fine Collection. Last October, she became the manager of the company's first Living Plus outlet, located in southwestern Taipei. It is a chain of stores that sells cosmetics, fragrances, and clothing, among other items, and now includes more than 20 branches around the country. "In addition to offering quality items, we want to create a stylish setting and add an aesthetic touch to the shopping experience," says Lo.
In Living Plus, Fine Collection is hoping to repeat the success it found with its Working House chain of stores. Established in 1993, Working House provides small home furnishings and lifestyle products, such as office, kitchen, and bathroom accessories. In recent years, it has developed rapidly into the largest chain operation of its kind in Taiwan, boasting more than 120 branches around the country. Combined, Working House and Living Plus generated about NT$1.8 billion (US$52 million) in sales in 2002, a 46 percent increase from the previous year. Fine Collection, moreover, plans to increase the number of Working House branches to 150 and Living Plus stores to 120 in the next three years.
Part of Working House's consumer appeal comes from its carefully crafted image. "Although 70 percent of our products come from overseas, they're invariably picked to meet local tastes," explains Dennis Hsu, chief executive officer of Fine Collection. "For example, Taiwanese kitchens are very different from those in other countries, not to mention distinctions in the general patterns of daily life. The Working House brand represents unpretentious simplicity in terms of color and design to suit modern people's preference for more natural styles."
Creativity plays a major role here. Goods that are designed by the in-house artists must meet the company's creative standards. "Even an ordinary item like a mug can be impressive for the way it's designed and how it fits into an overall arrangement," notes Sophia Shih, manager of a Working House store in Taipei. "Because similar things that function just as well are readily available elsewhere, our products are meant to create a good impression on customers who may develop a favorable opinion of our brand in general." Shih considers brand promotion to be the major task of a chain operation's headquarters as it helps attract potential consumers to individual chain stores.
The intention of building a distinct corporate image was what initially prompted Fine Collection to start a chain-store business. When it was first established in 1990, Fine Collection was primarily a supplier of miscellaneous products, such as inexpensive gift items and stationery goods. Planning to appeal to young students with its product line, Fine Collection began selling its wares to department stores, supermarkets, and bookstores. "Our products were displayed on various store shelves along with other brands," Hsu recalls. "Without our own marketing channels, we were unable to demonstrate our corporate value and integrity."
During the initial stages of establishing its chain stores, Fine Collection did not give up its role as a wholesaler, a move that Hsu now concedes was at odds with its new job as a retailer. In addition, most of the earlier Working House stores were small and situated within the same department stores that continued to offer similar goods at lower prices. "We were caught in a dilemma," Hsu says. "In terms of the design of products, ours were indistinguishable from many others in the gift market. On the other hand, we couldn't effectively lower our prices because we were still too limited in the business scale."
Once Fine Collection dropped its wholesale business and began to concentrate on the Working House retail chain, it developed a niche in the market by selling small home furnishings and accessories. "Our chain-store approach quickly led us out of the bottleneck onto another level," Hsu notes. "We found ourselves acting not only as sellers of specific items but also more generally as promoters of a certain lifestyle."
Dozens of the cramped Working House sites in department stores were closed in favor of new independent stores that were about seven times larger. The increased size of the stores was an important step in the chain's development, as a larger space was required to construct an aesthetically pleasing environment, Hsu adds. The expanded floorspace also facilitates the integration of other businesses, such as restaurants and cafe, so as to tap into the increasingly strong leisure culture.
Recognizing that women in their 20s and early 30s are their largest consumer target, Fine Collection established Living Plus in April 2002 to feature products aimed at young women. Cardtek has also recently honed its focus on women. During the same month, it launched the Starfly Bookstore chain offering comic books, magazines, and romance novels for women. Cardtek now operates more than 40 Starfly stores islandwide.
Established in 2000, Cardtek was formerly run by a computer software company that developed a pioneering computerized management system for Taiwan's book rental shops and set up the Star Bookstore chain ten years earlier. In addition to the Starfly and Star bookstores, Cardtek also operates 80 Network Planet Internet café outlets and a chain of stores selling low-fat jelly snacks in Taiwan.
The Star network now includes more than 700 stores in Taiwan, China, Malaysia, and Singapore. While other book rental stores during the 1990s were often dim and cluttered, Star outlets were well lit and adopted a more urbane approach to promoting leisure reading. "In addition to developing this cultured image in real space, we're seeking to provide better services in the virtual realm through the further consolidation of the chain system," says Tom Tsai, Cardtek's chief operating officer. He points out that Starfly stores will be unified under an Internet management system whereby customers can purchase credits to be used at any one of the chain's outlets. This system will gradually be expanded to cover all of Cardtek's existing and future chains, such as the planned breakfast stores.
The company is also concentrating on promoting its operations to potential franchisees, as most of the older Star outlets are already being run as franchises. "We're a company that can offer franchise operators with crucial know-how and can upgrade this knowledge according to the changing social environment," Tsai says. "Such support is crucial for the development of chain stores, which in turn will polish the corporate image of the franchise."
Hsu Shih-ching, who owns a Network Planet outlet in Taipei, also emphasizes the mutually constructive roles in the chain system. "After spending two months preparing for the opening of my Internet cafe, I've done all I can," Hsu says. "But I still need the assistance and guidance of Cardtek to help me clearly define the strategies necessary to gain customers and avoid price competition."
To build a link to the community, Network Planet stores have sponsored or participated in neighborhood events. For example, when a community group launched its own website, Hsu's store provided its members with free access to online learning. "It's also a way to prove our relevance beyond computer games," he adds.
For enterprises such as Fine Collection and Cardtek, the chain business model has helped reinvigorate traditional operations. By the same token, one after another, stylish neighborhood chain stores and their successful stories represent people's desire for a little fantasy and modest luxury in daily life. "Taiwan is a dynamic market where consumers keep pursuing a more sensible and interesting life," notes Fine Collection's Dennis Hsu. "So in spite of the relatively gloomy economic prospects, we're still quite optimistic about our business."
Moreover, an increasing number of young store managers and owners, such as Hsu Shih-ching, Sophia Shih, and Lo Hsiao-chieh, who are all below the age of 30, are devoting their youthful energy to chain businesses, and their expectations for the future are high.