Voluntary Report - Public distribution

**Date:** 12/19/2007

**GAIN Report Number:** TW7044

TW0000

**Taiwan**

**Retail Food Sector**

**Hypermarket Updates**

**2007**

**Approved by:**

Keith Schneller![](media/image1.wmf), Director

Agricultural Trade Office

American Institute in Taiwan

**Prepared by:**

Amy Chang-Chien Hsueh, Marketing Specialist

**Report Highlights:**

Costco recently opened its fifth hypermarket store in Taiwan which
received overwhelming response from Taiwan consumers.

Taiwan's hypermarket chains import food and beverage directly and also
purchase from local importers, wholesalers, and manufacturers. The
current tendency is to increase the volume of direct imports to avoid
the higher costs related to middlemen and extra handling fees.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Taipei ATO \[TW2\]

\[TW\]

The U.S.-based Costco Wholesale launched its fifth store in Taiwan in
early November 2007. Based on local press accounts, the Costco Taichung
Store achieved a world-wide record for a single Costco store with a
total of over 100,000 fee-based membership cards including household
cards being issued during the promotion for the grand opening of the new
store. The local *Commercial Times* reported in November 2007:

> "Costco Taichung has unexpectedly recruited over 100,000 members since
> its grand opening in early November 2007. With the Taichung Store
> coming into operation, Costco now has five stores in Taiwan and plans
> to expand to 10 outlets island-wide by 2011. Despite the overall
> hypermarket industry slowdown, Costco Taiwan's performance exceeded
> expectations, making a record high of total sales of over NT\$15
> billion (approx. US\$461 million) sales in 2006 (August 2006-July
> 2007); Its Neihu (Taipei) Store also ranked as the 'king of
> hypermarkets' in Taiwan, in terms of sales generated (around US\$154
> million), in 2006. This achievement shall be attributed to the
> leadership of CEO Richard Chan, who established first Costco store
> with Taiwan's President Enterprise Group in Southern Taiwan in 1997.
>
> Costco membership is grouped into two categories: general members and
> commercial members. In general, most of Taiwan's hypermarkets carry
> nearly 20,000 items with the exception of Costco which uses a very
> unique marketing strategy of displaying only 4,000 items in its
> stores. However, its single purchase average is approximately US\$100,
> two to three times the other hypermarkets in Taiwan. Its commercial
> members, accounting for only 40% of the total members, generate 60% of
> Costco's total annual sales. CEO Richard Chan said that Costco Taiwan
> customers have significantly high brand loyalty. The continuation rate
> of annual membership is around 80%, the highest among Asian Costco
> stores. In general, the gross earning of Taiwan's hypermarkets reaches
> 20 percent. However, Chan said that Costco Taiwan has compressed its
> gross earning to less than 14 percent.
>
> Costco Taiwan has had difficulties in finding suitable locations that
> has hampered its expansion plan. Its sixth store which will be located
> in the Hsinchu Area (Taiwan's Silicon Valley) is expected to be open
> by the end of 2008."

![](media/image2.jpeg){width="2.8333333333333335in"
height="1.875in"}Currently, Costco Wholesale is the only wholesale store
that issues membership cards with an annual fee of NT\$1200 (approx.
US\$37) in Taiwan. It differentiates itself from other chains by using
American style management, high percentage of imported goods, and bulk
packaging.

According to a 2006 AcNeilsen market research, Taiwan is ranked as
having the second highest hypermarket's density across Asia with one
store per 212,264 people. In 2006, Taiwan hypermarkets generated nearly
US\$4.4 billion in sales, a 1.6 percent increase from the previous year.
Foreign operators, including Carrefour, RT Mart/Auchan, Aimai/Geant, and
Costco, continue to dominate the Taiwan market, holding 81% market
share, in terms of sales generated. Currently, there are 117
hypermarkets in Taiwan. Geant of France withdrew from the Taiwan market
in September 2006. Since then Aimai/Geant has become a 100%
locally-owned hypermarket chain operated by Taiwan's Far Eastern Group.

![](media/image3.jpeg){width="2.6666666666666665in"
height="1.75in"}Taiwan's hypermarket chains purchase from local
importers, wholesalers, and manufacturers. However, the current tendency
is to increase the volume of direct imports to avoid the higher costs
related to broker fees and additional handling costs. U.S. suppliers can
sell directly to these stores by contacting their purchasing managers.
U.S. suppliers can obtain a list of major Taiwan hypermarket stores from
the ATO Taipei.

[Contact Information]{.underline}

Please see our website for more information on Taiwan market at
[www.usfoodtaiwan.org](http://www.usfoodtaiwan.org/).