Market saturation in Taiwan has prompted the island`s department store operators to seek expansion in mainland China, and their business there has been expanding rapidly in recent years.

One of the island`s department-store chains, Pacific Sogo (which operates under the Far Eastern Group) first set up shop in China in 1993 and now has 10 branches in Shanghai, Chengdu, Chongqing, Dalian, and Beijing. Together, these stores generated NT$21 billion (US$636 million) in revenues in 2007. Another Far Eastern department-store subsidiary, Far Eastern Department Store, has two branches in China, one each in Chongqing and Tianjin,

Group chairman Douglas Hsu recently announced that Far Eastern would expand its Chinese operation to 25 stores (most having floor space of 80,000 to 100,000 square meters) with combined revenues of 10 million renminbi (RMB) within five years, making it the biggest department-store operator there. The expansion will focus on Beijing, Shanghai, Chongqing, and Chengdu.

Far Eastern executives attribute their success in China to a high-end image among consumers there. For instance, the Chongquing outlet has only 43,000 square meters of floor space but raked in revenues of over NT$400 million RMB last year-more than a neighboring competitor with double the space.

Taiwan`s leading department-store chain, Shin Kong Mitsukoshi, is working hard to catch up with Far Eastern in China following an initial setback. Its first store in China, Shin Kong World in Beijing, started operating in April last year (with a floor area of 180,000 square meters, making it the second-largest in Beijing) but in August was taken over by Shin Kong`s Chinese partner, the Beijing Hualian Group, in a dispute over payment for engineering work. Shin Kong resumed management after the Taiwan Affairs Office of the State Council intervened, and managed to achieve revenues of 1.1 billion RMB in 2007. The figure is expected to jump to 2.5 billion RMB this year.

Shin Kong Mitsukoshi is looking for more sites in China, but suffered another setback when it lost a bid for its targeted site in downtown Chengdu. Now the company is said to be setting its sights on Suzhou, in Jiangsu Province.
(by Philip Liu)