Fresh baked goods and theme-based stores are also drawing customers.
In order to better serve as one-stop supply stations for local people in their daily life, Taiwan’s convenience stores are expanding their floor space, adopting more sophisticated technology, taking on more functions, and seeking to make their store layouts more attractive.
7-Eleven, the largest convenience store chain in Taiwan with 5,281 outlets as of mid-2018, has been following a larger-store strategy since 2008. During this year it aims to increase the proportion of large outlets – defined as those with space of at least 40 pings (1,440 square feet) – from 30% of all stores to 40%. There are even 130 outlets with more than 60 pings of space.
Large store size has also been the strategy of FamilyMart, the runner-up with 3,251 outlets as of last month. More than 90% of its stores now exceed 35 pings in floor space, and 50% have more than 45 pings.
The expanded dimensions have been an offshoot of what the convenience-store sector calls the “seating economy.” The terms refers to the policy of carving out a section in the store furnished with tables and chairs, enabling customers to sit down to consume snacks, meals, or beverages from the outlet.
Japanese-invested FamilyMart calculates that it now has a total of 50,000 seats in its Taiwan stores. “Now our task is to take flexible advantage of those 50,000 seats so as to create value- added benefits,” says Wang Jui-feng, director of the company’s general planning department.
The two staples of the “seating economy” are coffee and baked goods. Launched in 2005, 7-Eleven’s City Cafés sold 320 million cups of coffee in 2017, generating sales of NT$11 billion (about US$667 million) or around 8% of total revenue. In 2017, President Chain Store Corp., the Uni-President Group division that operates the 7-Eleven network, invested NT$600 million in new equipment for City Café, including fast cooling systems and advanced coffee-bean grinders. This year the company is concentrating on installing cold brew and nitro cold brew machines.
For its part, FamilyMart’s Let’s Café sold 100 million cups of coffee in 2017, generating NT$3.5 billion of revenue to account for 5.4% of the total NT$64.43 billion. The chain has been introducing more varieties of coffee, such as single-origin coffee and cola coffee, which was a hit vending-machine product in Japan last year.
Baked goods have also been growing rapidly as a major product segment. 7-Eleven now registers NT$5 billion in annual sales from over 70 kinds of baked products, including packaged breads, pastries, and even freshly baked breads (mostly at outlets at major transportation stations), provided by the bakery affiliate of President Chain Store. Some outlets also offer donuts from Mister Donut, another Uni-President affiliate. 7-Eleven’s baked-goods business has been expanding at an annual clip of 20-30%in recent years.
FamilyMart this year expects to generate NT$3 billion in revenue from baked goods, including bread, toast, pastries, and sandwiches, up 30% from 2017. The company last year opened its own bakery at a cost of NT$1.7 billion. Headed by a Japanese manager assisted by a Japanese consultant, the bakery produces over 20 kinds of Japanese-style baked goods. The bar codes on the packaging contain a time parameter to prevent the sale of outdated products.
The bar codes also collect a variety of sales data, enabling FamilyMart to conduct big-data analysis to track customer preferences and forecast sales trends to guide production planning. The system helps to facilitate sales, cut down on waste, and maintain product freshness.
“The data analysis results provide us with precise sales forecasts as the basis for production,” says FamilyMart president Hsieh Tung-tu. “Combined with logistics it enables us to form a seamless automatic circle covering sales, production, delivery, and order placement.” He adds that “with our own bakery, we can respond to consumption trends or shortfalls quickly, concentrating on the products favored by consumers.”
Relying on technology
In fact, technology has played an increasingly important role in FamilyMart’s operations. In July last year it introduced an advance sales app enabling members to place their order at discount and collect the items at any designated outlet later on. The program generated NT$1 billion of sales from around 1 million members over the past year, mainly from coffee and other beverages.
This March, FamilyMart opened a NT$10 million technology-concept outlet, situated on Chongqing South Road near the Taipei Main Station, where a robotic host named Robo provides service advice and a robotic arm makes and dispenses coffee. Other technologies employed at the store include electronic labeling, capable of updating merchandise information in one second; provision of information on discounts and food traceability; an “interactive shelf” with screens for video introductions; and a “VR shop” through which customers can purchase more merchandise online in an interactive manner.
FamilyMart chairman Yieh Jong-ting notes that the system reduces the workload of the store personnel, while providing customers with an interesting shopping experience. “Given the growing labor shortage, the major purpose of the technology-oriented outlet is labor saving,” says Yeh. “It can decrease the amount of labor needed by 1,000 man-hours per year.” A second technology-concept outlet was opened inside the Southern Taiwan Science Park in Tainan on August 13.
Also enthusiastic about technology, 7-Eleven in January this year inaugurated its own tech-oriented concept store, dubbed the “X-Store,” which eliminates the need for staffing entirely. Situated on the first floor of President Chain Store’s headquarters building in Taipei’s Xinyi District, the store features facial recognition and merchandise recognition technology, plus e-labeling, automatic microwave ovens, and refrigerators with inductive automatic doors. Like the staff-less FamilyMart store, it required an NT$10 million investment.
After gaining access to the store through facial recognition, customers are met with a customized greeting from a robot. Before departure, a merchandise recognition system connected to a POS (point of sale) system identifies the purchased items and tallies up the bill, which the customer then pays with 7-Elev-en’s proprietary e-payment card, icash. A second X-Store, inside an outlet near the Taipei MRT’s City Hall station, was launched in mid-July.
Lo Chih-hsien, the chairman of President Chain Store, says the X-Stores eliminate the need for menial tasks to be performed by staffers, freeing them up to focus on improving customer service and merchandise management. “It takes 30-45 seconds for a staffer to prepare a cup of coffee,” notes Lo. “If the job is automated, 3 million man-hours of labor would be saved a year, since 7-Eleven annually sells 300 million cups of coffee.”
Another offshoot of the “seating economy” is the combination store in which the convenience store is located under the same roof with other businesses, often through alliances with other companies. In March, for example, FamilyMart launched a counter inside one of its outlets in New Taipei City’s Banqiao District to sell fried chicken from bb.q Chicken, South Korea’s largest fried-chicken brand. It was an instant hit, evidenced by the long queues constantly in front of the store. FamilyMart estimates that the number of customers increased by 10% and turnover by 50% in the first month, when sales of fried chicken exceeded NT$1 million.
Encouraged by the success and seeking economies of scale, FamilyMart had increased the number of such outlets to five by the end of July, including three in Greater Taipei, one in Taichung, and one in Kaohsiung. The total is expected to reach 10 by the end of the year.
Since 2015, FamilyMart has opened 19 such combination stores. Besides fried chicken, the partners’ counters have specialized in such offerings as fresh produce, fish, and meat; non-prescription pharmaceuticals; and Yoshinoya-brand Japanese beef rice.
In addition, FamilyMart has joined hands with the Hotai Leasing Corp. in offering car-rental service, which is now available at 270 outlets. After booking the service by mobile app, customers get their rental car from one of the vehicles parked in front of the convenience store. When the car is returned – at any time of the day or night – the fee, calculated on an hourly basis, is paid by EasyCard.
Inspired by the success of FamilyMart, 7-Eleven is preparing to set up a combination store in the second half of this year featuring the fried chicken of 21 Plus, a brand under the Uni-President Enterprises Group. In fact, in cooperation with other Uni-President affiliates, 7-Eleven has opened many combination stores selling baked goods and grooming products. The number is expected to top 100 by the end of the year.
7-Eleven’s largest store in Taiwan, the 112-ping Hungtai outlet in downtown Taipei’s Xinyi District, features a 30-ping seating area where various kinds of baked goods are available, including freshly baked products produced by the affiliated bakery and Mister Donut.
On the second floor of the Tungchia outlet near Taipei’s Xingtian Temple is a 55-ping Being Fit gym, also an affiliated brand. Customers can work out before going downstairs to have some beer or other beverages and snacks. Use of the gym is paid for with icash each time, without need for an annual fee.
To help induce customers to stay longer on each visit, convenience store chains have taken pains to create attractive layouts for their stores, especially encouraging franchised outlets to come up with characteristic décor elements. “We no longer want all our outlets to have a uniform appearance,” notes Chen Jui-tang, special assistant to the chairman and former president of President Chain Store Corp.
An example of the new approach is 7-Eleven’s Tengta store, decorated based on a “sakura” or cherry blossom theme, in Hengshan Village of Hsinchu County. Through floor-to-ceiling glass windows, customers sitting inside the store can watch the small trains of the Neiwan branch line zigzagging past cherry trees in full bloom during flower season.
To help inspire franchised outlets to come up with suitable themes, 7-Eleven created a “future image store” by renovating the Changyeh outlet in Taoyuan’s Zhongli District in January this year. With its green interior, the 81-ping store is designed to project an atmosphere of leisure and tranquility. During the one-month soft opening, the store recorded 20% growth in both the number of customers and total sales.
As of late March, 933 of 7-Eleven’s outlets had been renovated with characteristic layouts. The number is projected to hit 1,150 by the end of this year.
For its part, FamilyMart has devised various themes for store designs – such as forests, spontaneity, and a coffee-shop style – as reference for franchised outlets. In order to compete with e-commerce, says President Chain Stores’ Lo Chih-hsien, physical outlets need to provide more service and offer customers a richer experience service. When each store has its own unique character, people may patronize it not just for shopping but to enjoy the atmosphere.
Thanks to the contribution of the “seating economy,” convenience store sales have continued to grow in Taiwan, despite the emerging threat from e-commerce. In 2017, the total turnover of convenience stores in Taiwan reached NT$317.3 million, up 2.8%, continuing the record of growth each year since the statistics began to be kept 18 years ago. Performance in 2018 has been even better, with total sales jumping by 7.1% to NT$167.2 billion in the first half.
As of the end of 2017, there were 10,662 convenience stores in Taiwan, or one for every 2,222 people, the second highest density worldwide, according to the Department of Statistics of the Ministry of Economic Affairs. Taiwan trails only South Korea, which has 35,282 outlets, one for every 1,452 people, and is ahead of Japan (56,374 outlets, one for every 2,248 people),
Besides 7-Eleven and FamilyMart, the other major convenience-store chains in Taiwan are Hi-Life with 1,200 out-lets and O.K. Mart with 850. The great majority of local convenience stores – 90% in the case of 7-Eleven – are operated under franchise. In addition to its Taiwan operations, President Chain Store also runs 7-Elevens in Shanghai and Zhe-jiang in China and in the Philippines, where it now has 2,370 outlets.