Conglomerates try to crack open market.
For hordes of Taiwan's rural residents and office workers, a hard day in the fields or at the stock exchange leaves little time for a trip to the city or a stroll around the warrens of a department store. Even though Taiwan has one of the most convenient shopping environments in the world, many people work long hours and weekends, making it difficult at best to tend to life's luxuries.
In addition to the many department stores, wholesale superstores and supermarkets that dot urban and suburban landscapes, Taiwan boasts the world's highest concentration of convenience stores with around 8,000 for 23 million people, or one for every 3,000 people. President Chain Store Corp., which owns more than 3,800 7-Eleven stores, totaled around NT$80 billion (US$2.53 billion) in 2004 revenue.
Despite its success, the retail giant may soon move into the nation's living rooms, where shopping mania has swelled quickly over the past few years. This year, Eastern Multimedia Group's five cable TV shopping channels are expected to garner record sales of more than NT$40 billion (US$1.3 billion), a surprising 80-fold increase from their first year of operation in 2000. Eastern owns other entertainment, news and kids channels and is also a cable operator as well as a broadband service provider.
The magic of luring NT$100 million (US$3.2 million) every day from TV viewers' pockets has placed Eastern as one of the top five home-shopping-network operators in the world. Considering Taiwan's smaller market, Eastern's business expansion in fact outperforms that of the leading players in the United States and South Korea, where TV shopping has long been a regular form of purchasing, according to Chen Wun-hwa, chairman at National Taiwan University's Department of Business Administration.
Jaw Yi-long, professor of international business and distribution management from the same university, says that, just as department stores, hypermarkets or convenience stores reflect a certain level of economic prowess, so too does the advent of TV shopping. "Most of the things sold on TV are not a must, but rather a nice-to-have for everyday life," Jaw says. "People have a considerable degree of purchasing power and higher expectations of life."
In January this year, Fubon Multimedia Technology Co. launched the Momo cable TV channel as its entry into the 24-hour home shopping market. The first competitor to challenge Eastern's channels on a national scale, Momo has signaled its intention to compete for a share of the estimated NT$100 billion (US$3.17 billion) market per year. Taiwan's TV shopping market is approximately half that of South Korea, a country with twice Taiwan's population and a similar per capita income.
Among other things, Momo is expected to take advantage of the expertise of its parent company, Fubon Financial Holding Co., to offer financial products such as mutual funds and insurance. C. F. Lin, president of Fubon Multimedia, says, "In modern society, whether customers get your products on time is just as important as what you offer."
Chen points out that Taiwan's TV shopping channels have shown greater flexibility and creativity than their foreign counterparts and are developing beyond simple retail sales by offering a broad range of services. In addition to such items as cosmetics, jewelry, health food and clothing that are regularly sold on foreign TV channels, Taiwan's home shopping operators are quick to explore new types of merchandise such as tour packages, cars, motorcycles, houses, wedding photo packages and even funeral arrangements--"practically anything that a show host can persuade someone to buy," Chen says.
TV shopping programs existed for years on local cable systems selling over-the-counter drugs, such as aphrodisiacs and weight-loss medicine, before revisions to the health food management regulations became effective in the late 1990s. "Those busiesses were quite small and only reached a limited audience," Jaw says, "even a host on such a show would have little left in the way of a career." Now, a show host or "shopping expert" has become a much-admired position and can lead to a future in acting. The popular sales queen Li Jing, who once sold NT$200 million (US$6.3 million) worth of cars in just an hour, has picked up a role in a soap opera.
The TV shopping fad is evidence of a higher level of trust between retailers and buyers. "Eastern is a big enterprise and people have faith in its financing and distribution abilities," says Chen Ching-ho, chairman of National Chengchi University's Department of Radio and Television. "Just several years ago, who would ever have thought of calling a TV station to buy a car or a diamond?" Because distribution is more reliable than before, Eastern has created its own brands such as De Mon cosmetics and the Ardore fashion line.
Momo's Lin says a branding war is looming. "I believe that people buy our products because of Fubon's positive business image, rather than some famous show host's explanation or a beautiful model's demonstration," Lin says.
While big brand names engender trust in the same way as the eventual success of reliable shopping Web sites, the nature of the medium also plays a crucial role. "It usually takes an indefinite length of time for shoppers to accept a new channel," Chen Wun-hwa says. "But TV is such a familiar household item that people don't need much time to get used to a new application." As for online alternatives, there are still a lot of people, such as the elderly or those who have only finished high school, who either do not know how to or just do not use the Internet. "But anyone can turn the TV on and make a phone call," Chen Wun-hwa says. "And more often than not, a TV viewer is more likely to buy than an Internet surfer because the presentation of the product is more dynamic."
The professor points out that easy access to TV shopping channels--more than 85 percent of Taiwanese households have cable connections--is a wake-up call for businesses to tap into a market where the primary consumers have physical problems, work at night or live in remote areas. In urban society, this group of shoppers also includes those who find themselves too busy or tired to go shopping in a bricks-and-mortar store. This is perhaps one of the reasons why Momo's customer base is mainly composed of women who work in offices.
Momo gets this kind of customer information through its computerized call center. At this central section of the shopping station, any transactions, refunds or complaints by shoppers are recorded for the management of long-term customer relations. "Marketing campaigns based on such a solid membership program are a key to Eastern's success," says Chen Ching-ho. Eastern tracks major customers' purchase histories and preferences so as to match their needs with distinct products on its different shopping channels.
Chen Ching-ho says Eastern's mature 2.5-million-member base of more than 4 million households will be a formidable hurdle for Momo's attempt to grab more market share. Fubon is, in the meantime, ambitious to apply its own consumer databank to track individual sales. "We have never seen ourselves as simply a TV shopping channel operator," Lin says. "TV is only a part of our virtual distribution project." Fubon will start its Internet and mail order operations later this year, while Eastern also offers online and catalogue shopping services.
For those who enjoy inspecting a product before buying, Fubon plans to open its real-world shopping business center in the near future. "Non-store distribution channels cannot replace traditional stores," says Jaw.
In addition to trying to achieve a proper balance between virtual and physical venues, would-be TV shopping channel operators need to consider government regulations. In accordance with a TV channel rearrangement scheme launched at the beginning of this year by the Government Information Office, home shopping channels are no longer numbered 1 through 25, a section now reserved for family-oriented programming. Moreover, regulations specify that the number of such channels cannot exceed one tenth of the total number of available channels--which currently stands just below 100. While potential newcomers to the business and scholars like Chen Wun-hwa call on the government to take a hands-off approach and let the market decide, Chen Ching-ho welcomes such restrictions because he says they will prevent price wars and other predatory practices.
In any case, Eastern Multimedia Group's tremendous profits from the TV shopping sector have lured a number of companies to consider setting up shop, thus signaling the start of what may become a long battle for pocketbooks in front of screen.