Taiwan Today

The situation could have come from a science fiction novel: walk into a store with no human employees and buy some groceries from hi-tech vending machines. In November 2006, convenience store operator Circle-K launched its two latest convenience stores, dubbed "Q-Shop," in Taipei City. They contained no clerks, the company claimed in its Nov. 28 press release, instead using automated machines to serve local customers. The release added that the idea of opening unmanned convenience stores came from Japan, where many of Taiwan's new business practices come from. There are expected to be over 9,000 convenience stores by the end of the year, but Chang Ting-chen, director of the operations division of Hi-Life International Co. Ltd., still saw potential in the saturated convenience store market. "This sector, in my opinion, will be less seriously affected by lower consumer spending than other retail operations," Chang said, emphasizing how necessary convenience stores were in daily life. The Ministry of Economic Affairs Department of Commerce launched an intelligent shop promotion project 2006, intended to boost the sector's added value, according to the project's Web site. Looking to cooperate with that initiative, Circle-K invented a new retail model called "Unmanned Convenience Store." The typical one will measure between 16.5 and 19.8 square meters and have vending machines selling approximately 300 kinds of products, including drinks, cookies, health products and other daily necessities, said Circle-K Advertising Manager Grace Lin. "These two experimental Q-Shops will test consumer response," she added. As the island's fourth largest convenience store operator, Circle-K is expected to have 860 outlets all over the island and US$364 million in annual sales at the end of 2006, Lin confirmed. According to the Taiwan Chain Stores and Franchise Association, there were 8,656 convenience stores on the island at the end of 2005, each serving 2,700 people on average. This number represents the highest store density in the world. The other major domestic convenience store operators include President Chain Store Corp. with 4,380 7-Eleven stores, Taiwan FamilyMart Co. with 2,000 stores, Hi-Life with 1,159 stores and Taiwan Nikomart Co. with 360 stores. Department of Commerce Director-General Wang Pai-por was quoted as saying that the DOC commissioned the Institute for Information Industry to assist in establishing Q-Shop as a new channel to boost the retail sector, according to Circle-K's press release. III is a nonprofit organization sponsored by the MOEA. Wang claimed that this new intelligent shop could solve some of the problems encountered by local retailers, such as the difficulty of finding suitable and affordable locations, limited shop space and scarcity of qualified employees to operate the shops. "It took us four months and cost US$60,000 to establish a Q-Shop, similar to setting up a regular convenience store. But one of the advantages of a Q-Shop is reducing a lot of the costs," said Lin. In a Dec. 12 report, Chinese-language online newspaper iThome online stated that when an ordinary convenience store sold a US$3 product, US$1.5 went to staff expenses. Unmanned convenience stores have the advantage of reducing not just personnel costs but also other expenses, such as rents, the report continued, adding that this kind of new retail model is particularly suited to densely populated urban districts as well as in many remote areas. III's Innovation Digitech-Enabled Applications and Services Institute designed the vending machines and wrote the software to operate Q-Shop. Institute director Jian Si-cun was quoted in the report as saying that an ordinary convenience store is about 66 to 99 square meters in area, with 2,000 to 3,000 products. In contrast, an unmanned shop is only 16.5 to 19.8 square meters in size and filled with 300 to 400 of the most popular products. In terms of profit per square meter, Q-Shop can surpass traditional convenience stores, Jian noted. Shin Kong Commercial Bank established a secure payment platform for the new venture. "All of the vending machines in Q-Shop accept cash or credit cards," said Lin. Transactions below US$25 are payable by a credit card without the card owner's signature. If Circle-K and Shin Kong can reach an agreement, the cap on transactions in Q-Shop could become higher, noted Jessica Yang, section manager of Ideasi. Although unmanned shops save on many labor costs, consumer safety is equally important. Taiwan Shin Kong Security Co. Ltd. equipped each vending machine with digital video cameras and digital surveillance systems. SKS placed an emergency button in each Q-Shop. By pushing it, consumers can talk to the service center through Voice over Internet Protocol technology. With VOIP, employees in the service center can immediately know what happens in the Q-Shops and take appropriate action, such as calling the police. In the future, Q-Shop could expand to selling a variety of products, particularly higher-priced items like movie tickets or theme park tickets, said Yang, adding that vending machines should also provide comprehensive information on the products for consumers. Thanks to its cost efficiency, Q-Shop can afford to give a 10 percent discount on all drinks and still make a profit. Some customers may miss the clerks' smile and their welcome greeting, but they may be willing to overlook it in favor of their pocketbooks.