First-day-of-sales figures are watched with particular interest: Shin Kong's 13 stores islandwide garnered more than US$30 million Oct. 5, the first day of its anniversary sale, a figure almost matched by Sogo's four Taipei stores, when it took in US$21 million Nov. 9. An estimated 5,000 shoppers had gathered outside Sogo's flagship store in the days before its sale started, as diehard customers queued for items on special discounts at limited quantities. According to Sogo spokesperson James Wang-Kuo, the numbers of such people have grown about 20 percent annually. This year people filled the streets around the store as far as the nearest underground station, he told the semi-official Central News Agency. Wang-Kuo added that the highest single purchase on the store's first sale day exceeded US$75,000.
Most of the island's department stores had posted stagnant or even falling turnovers between January and June compared with the same period last year. Sogo, for example, reported a 3.7-percent decline for the first half of 2006, with Shin Kong doing slightly better with a scant 1 percent increase. Factors identified as contributing to this situation included financial problems related to the credit- and cash-card crisis which peaked in February and March, and the rising global oil prices, both of which weakened consumer spending power and thus affected local department store revenues.
This situation showed some improvement at the beginning of the third quarter when, according to statistics from the Ministry of Economic Affairs, July turnover at the island's department stores posted a 10.79-percent increase over June, even though the year-on-year figure still fell by 0.16 percent.
Local entrepreneurs then pinned their hopes to the series of sales and promotional events held to celebrate their anniversaries and stimulate consumer interest. Shin Kong's executive vice president Richard Wu, for example, told local media that "private spending in department stores will definitely pick up in the fourth quarter as the card loan problem has nearly bottomed out."
Taiwan's department stores have developed unique marketing strategies that cater to local consumer culture. Food courts serving a wide range of meals and snacks are typically located in department store basements, for example. Promotional events are held throughout the year: in addition to anniversary sales, there are end-of-season sales in spring and autumn, Lunar New Year sales in winter and mid-year sales in summer, as well as innumerable activities held to coincide with festivals and holidays, such as Valentine's Day, Mother's Day, Father's Day, Christmas and even the beginning of school semesters.
Anniversary sales--mainly held between October and December--are awaited with particular interest, however, as department stores typically offer customers vouchers worth around 10 percent of the products they purchase in addition to marking prices down by significant discounts on products ranging from cosmetics, shoes and clothes, to daily necessities and foodstuffs offered in the stores' supermarkets. Cosmetics and beauty products, usually given prime locations on the first floor, often rank as department stores' top sales category. A Shin Kong spokesperson confirmed that, for her company, beauty products represented 30 percent to 40 percent of total sales. Some companies even reward regular card-holding customers with a monthly gift just for turning up at the store, while those who spend more than certain quotas can have their names entered into draws, with prizes ranging as high as automobiles.
Such promotional activities and their frequency may also reflect the desperate situation in which an excessive number of department stores must compete for a limited market of customers, however. In Taipei's five main commercial districts, for example, 26 department stores compete for the disposable incomes of the capital's 2.6 million citizens. This ratio of one department store per 100,000 people makes Taipei the city with the most department stores per head of population in the world, according to the CNA. This figure far exceeds what CNA reported the Japanese government termed the "appropriate ratio of department stores," which was expressed as one store measuring about 33,000 square meters of retail space per 500,000 to 600,000 people.
To add to department store woes, sales for all retail sectors are still struggling. The Consumer Price Index fell in October for the third straight month, which indicated sluggish public consumption, said Kuan Chung-ming, director of the Institute of Economics of Academia Sinica, in a local report. Kuan did not identify any signs of deflation from this falling CPI. Market analysts will have to wait until the release of next month's index to see what effect the department stores' anniversary sales have, however.