Taiwan shopping behavior and trends
On the back of continued economic growth in the Asia-Pacific region, CBRE expects retail sales in the region to rise by 10% to US$7.6 trillion in 2015. This is equivalent to half of the GDP of the United States.
While higher sales projections bode well for retailers, the outlook is not universally rosy. Competition is intensifying while operating costs are rising. Labour costs are rising everywhere, although rental prices are rising only in some areas and declining in others. According to Hsu, consumers in the region are becoming more sophisticated and discerning. Retailers will need to respond in various ways including by building better flagship stores and finding ways to improve the shopping experience and use of social networking. Retailers also need to adapt to the reality of e-commerce.
Bricks and mortar retailers will struggle to compete on either the price or convenience of online offerings, given the ever-improving service performance and convenience of online platforms. However, a majority of people still like to shop in real stores, especially for things like clothes. Two thirds of respondents in the survey said that the overall experience is important, which is why landlords and retailers need to find ways to make shopping malls better. According to the survey results, the most important factors that make a shopping centre appealing for consumers are: price, cleanliness, convenience and security. It is clear from the survey that unless these four basic requirements are met, customers will stay away.
According to the survey, 55% of overall respondents thought that malls had improved over the past year, although only 42% of respondents in Taiwan thought so. One of the most effective ways to increase the appeal of shopping centres is to improve entertainment facilities. Landlords in many malls are now responding by trying to improve the variety and quality of entertainment (especially food and beverage options) in their malls as a way to keep customers in stores longer. Should the strategy succeed it would help malls to compete with online retailers since a good shopping experience combined with a good dining experience can only be had in a real store.
While there is still a strong appetite for expansion on the part of luxury goods retailers, some top-tier luxury brands have consolidated sales network in China and Hong Kong, due to weakening sales growth (2014 actually saw a double digit decline in luxury goods sales in Hong Kong) and instead shifted expansion focus to Japan and Australia. Growth is expected to be less marked in mid-range fashion and specialist clothing but Hsu expects the biggest growth segment to be food and beverages as landlords are keen to introduce more F&B elements to retain and prolong foot traffic.
Retail space in most cities is expected to increase in 2015 and 2016 but availability remains tight in prime areas. According to CBRE, rents are expected to rise the most (over 20%) in Tokyo in 2015 (given tight supply), over 10% in Manila and Sydney and by about 5% in Taipei. However, CBRE expects rents in Hong Kong to decline slightly. Other areas where there has been a large increase in supply in recent years such as Vietnam and Shenzhen in China may see lower rents.
Hsu concluded with some advice for retailers: 1) Understand the market by investing in due diligence and benchmarking with competitors; 2) Understand and educate your customers; 3) Focus on quality landlords and locations and be patient in negotiations with landlords and 4) Formulate an omni-channel strategy to provide seamless consumer experiences for both in-store and online customers.