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Talk of the Day -- Sales data point to shrinking middle class

2012/04/23 23:08:01

The effect of the M-shaped society phenomenon has on consumer spending has become ever more evident in Taiwan, according to local media reports.

Citing department stores operators, the reports said sales of luxury brands continued to soar in the first quarter of this year, bucking a downward trend seen in other sectors.

M-shaped society refers to a polarized society with the extreme rich and the extreme poor.

With the advance of globalization, an M-shape society is forming to denote the two extremes, with the middle class gradually shrinking and disappearing, the reports said.

Such a development has had a strong impact on local department store operations and is threatening survival of local fashion designers, according to the reports.

The following are excerpts from local media coverage of changing consumer spending trends:

United Daily News:

Statistics released by credit card companies show that department store sales dropped by 15 to 20 percent in the first quarter of this year due to a combination of factors such as the presidential election and eurozone debt crisis.

Although sales rebounded a bit around the end of March, the momentum has slackened following rises in fuel prices early this month and announcement of hikes in electricity rates from mid-May.

Pacific Sogo Department Store General Manager Lee Kuang-jung said the company's Zhongxiao store, which mainly targets middle-class consumers, saw a significant drop in its Q1 sales, with non-daily necessities such as clothing and accessories taking the brunt of the fall.

In contrast, the company's Fuxing store, which targets the top of the pyramid or members of the upper class, posted a remarkable year-on-year increase in Q1 and its Monther's Day presales have grown by 17 percent, with the average unit price surging 12 percent.

"One of the effects of the M-shaped society is the more expensive the goods, the brisker the sales," said Hsu Shu-hsien, head of the Fuxing store.

Top luxury brands such as Cartier, Hermes and Chanel have all posted a nearly 20 percent sales growth, Hsu said, adding that limited editions of handbags and jewelry have all sold out.

Other upscale stores, including Taipei 101 Mall and Regent Galleria, have also reported an average of 20 percent growth in Q1 sales.

"Rising fuel and electricity prices may impact ordinary people's daily lives, they would little impact on wealthy people," said a Taipei 101 Mall marketing manager.

According to her, the mall saw its jewelry sales increase 6 percent and other luxury goods sales surge 10 percent shortly after reports of fuel and electricity prices hikes in early April.

Other sources said major upscale department stores have recently forced relocation of retailers of affordable women's garments to make room for luxury fashion brands such as Tory Burch, Carven and Martin Margiel.

Meanwhile, some other stores unable to attract top brands to open sale counters have focused on luring leading foreign fast fashion brands such as Zara and Uniqlo.

As a result, homegrown fashion brands featuring locally designed affordable clothings have been squeezed out of major local department stores, market sources said. (April 23, 2012).

China Times:

The results of a survey conducted by Go Survey shows that 66 percent of respondents said they will cut their spending in the months ahead amid looming surges in electricity rates.

Nearly 50 percent said they will increase savings.

An analysis by Go Survey based spending data of the 9 million Sogo Happy Go card holders also shows that the number of times each card holder consumed at Sogo stores per month during Q1 declined by 3 percent. (April 23, 2012).

(By Sofia Wu)