PRINT THIS STORY:

CHANGE TEXT SIZE:

Taiwanese market slowly comes into its own

by Susan Thorne

Downtown Taipei’s AsiaWorld, while on the cutting edge, is experiencing somewhat disappointing results.

It’s been a long time coming, but Taiwan’s shopping center sector is getting on its feet and taking some shaky first steps.

The southeast Asian island nation of 22 million, a busy area for the high-tech industry, is one of the last Pacific Rim countries to acquire its own shopping centers, despite its relative prosperity: Taiwan enjoys an annual per-capita gross national product that ranks ahead of Thailand, Malaysia and the Philippines, according to statistics from Asiaweek magazine.

The late-1990s Asian financial and economic crisis affected Taiwan less strongly than in other parts of the region, and its national economy rebounded with 5.5% overall growth last year. On the retail front, there was even stronger year-over-year growth of 11.8% from January to November 1999, according to information from Investec, a Taipei-based real property consultancy.

Taiwan has had a single downtown shopping center, the upscale, 285,000-square-foot The Mall, since 1994, but recent improvements in zoning conditions have ushered in a burst of activity: Three new shopping centers were opened in 1999, and a total of more than 70 announced shopping center projects are at various stages of planning and development at present.

At this early stage, however, the shopping center concept is achieving mixed results.

Taiwan’s first suburban shopping center, Taimall, owned by the IEC Co. (International Engineering Construction), a Taipei-based construction company, opened with a major impact in July 1999 in the Taipei suburban community of Taoyuan. People crowded into the mall in its first months, said Calvin Wang, founding chairman of Taiwan’s Shopping Center Development Council and president of Investec (Taiwan), “but not that many people were spending very much. Food and beverage and other small-item spending were good, but sales of higher-cost merchandise such as clothing were disappointing.” The result: losses of $150 million NT (New Taiwanese dollars), or around $5 million. A lackluster merchandise mix is one cause, Wang said, noting he feels there are few interesting brands among the retail offerings and rents were originally set too high.

The owners are currently endeavoring to restructure and reposition Taimall with lower rents and features such as a 10,000-square-foot Dave & Buster’s.

In downtown Taipei, the 26,000-square-meter AsiaWorld Shopping Mall, opened in April 1999, is also experiencing somewhat disappointing results. AsiaWorld is part of a mixed-use complex housed in a former department store property remodeled with central atrium and glass exterior.

It is on the cutting edge of retail for Taiwan, with an IKEA store and Asia’s first outlet of the French music/electronics and books retailer FNAC. These anchors and other retailers such as Max Mara and Starbucks stress a young urban lifestyle, which gives the center a unique and unusual character, said center general manager Andrew Yang. Yet while many people appreciate this novelty, the traditional shopper accustomed to the open Eastern marketplace finds the modern storefronts intimidating.

Yang is optimistic that the market will adapt — “Taipei is quite fast in assimilating new things, especially Western and international ideas” — but in the meantime, he is educating shoppers and fine-tuning his approach, adding temporary tenants and more center events to bridge the transition from old to new

A third new shopping center, a vertical complex called Treasure Island, also opened in 1999 in Kao-hsiung, Taiwan’s No. 2 city, but results to date are not available.

In theory, Taiwan ought to offer an excellent market for the modern mall because of the lack of such centers and an emerging middle class with strong spending power. But strong competition from other retail formats and the blurring of the usual distinctions between retail categories make the situation quite complex.

The largest retail category is the department store, which accounts for 31% of retail revenues nationwide, Investec data show. Participants in this sector include Japanese leaders like Far Eastern, Mitsukoshi, Seibu and Sogo, and France’s Au Printemps. Department stores typically follow the Japanese system of renting out concession spaces to retailers and manufacturers within their stores, thus partly filling the shopping center’s role of providing many diverse retail offerings under one roof. And Wang points out that department stores are changing to become more similar to shopping centers — increasing in size and including more entertainment and one-stop shopping convenience features.

The hypermarket is also firmly established in Taiwan, with a 24% market share of the organized (modern, as opposed to open-market) retail sector and 19% sales growth in the first two years, according to Investec.

The recent relaxation of land-use legislation benefits these retailers, too, in undertaking suburban projects, though some of their new sites are within shopping centers: Dutch large-format grocer Makro is an anchor in the Taimall, Tesco will locate in GO2 Town in Taoyuan, and Carrefour has signed on for the upcoming Metrowalk shopping center project. Department stores, on the other hand, generally don’t participate in malls.

On the plus side, retailers welcome the chance to showcase their merchandise in their own stores in a shopping center, as opposed to the low-visibility department store venues now available, said Laurence Elms, executive vice president with the Hungkuo Group, Taipei, a real estate developer. “Department stores are interested in promoting their own brands, not the tenants’ brands,” Elms said.

So which shopping center format will prevail in Taiwan? Scott Kilborne of RTKL, Tokyo, designer of AsiaWorld, feels the automobile-centered U.S. suburban model is not a good fit with Taiwan’s current living standard. A large proportion of families do not own cars, he pointed out; one of the amazing (to Westerners) sights of the island is the spectacle of entire families balanced on a single motorbike. And Taiwan lacks a highly developed public transportation network like those of Japan or Hong Kong to bring shoppers to venues outside the city center, Kilborne pointed out.

The most workable configuration will be quite different from the North American norm, asserted Douglas Meyer, Associate Partner with Altoon + Porter, the Los Angeles-based international architectural firm involved in design of two suburban projects in Taiwan, the GO2 Town in Taoyuan and GO2 Center in Tai-Nan County.

One major difference is a scarcity of potential department store anchors because of the independent and competing role of department stores; thus the U.S. model of two to four department stores with in-line specialty shops in between does not apply, Meyer indicated. “Rather, a more urban mix of shopping, entertainment, and community activities including education elements seems to be more the prototype.”

Food — both food service and grocery retail — is also important to the mix; hypermarkets will be included in the two above-named centers, for instance.

“The jury is still out in Taiwan, and I think they will redefine the shopping center in a more urban context, more vertically and with many more smaller retail shops, perhaps not as highly evolved as the branded specialty shops in a U.S. mall,” Meyer summed up.

A host of present and future centers and mall expansions are currently in the pipeline. Some notable ones are Metrowalk in the Taipei suburbs; Core Pacific City, a vertical downtown Taipei mall with over 1,000 shops; and Breeze, a 400,000-square-foot high-fashion center set to open in 2001.

The Taiwan Financial Center, owned by the Hungkuo Group, being designed as a world landmark with the island’s tallest building, will include 750,000 square feet of retail and is scheduled for a fall 2002 opening. Such projects will help to set the pattern for Taiwan’s emerging shopping center sector.