Chapter 3: Characteristics of the Import Market
Prior analyzing and determining the import strategy, a comprehensive import market analysis
must be proceeded in order to answer the following questions:
y
Can the people in the country afford the product? Is citizens’ income adequate to
implement purchases?
y
Does the country’s government permit and promote the import of the products?
y
What are legal barriers of importing the products?
y
How does the competitive environment look like?
y
Who are the (potential) customers and how they behave?
y
Is the quantity demanded sufficient? What is approximate market size?
The first question is associated with the economic forces, while the following two with the
political policies and legal practices (including tax system since those cannot be evaded and
directly impacts companies’ profits), and the last with the supply and demand sides. Being
more specific with the above mentioned questions, a market research is implemented since
amber product is already sold in Taiwan. Thus, this situation although eliminates the
properties of first-entry advantage, but it provides the opportunity to learn from the existing
companies that sell similar products and at the same time to learn about the (potential)
customers behavior.
25
Import
Market
Economic
Situation
Political
and
Legal
Environment
Government
Policy
towards
Trade
Government
Policy
towards
Import
Tax System
Competitive
Environment
Local Customer
Analysis
Market Size and
Its Features
Major
Sales
Channels
and
End-User Profile
Amber Jewelry
Market in Taiwan
Summary of
Findings
Figure 3.1: Chapter Content
26
Section 1: Economic Situation: Income, World Positioning
Due to the several decades lasted economic development, Taiwan has experienced rapid
economic expansion. From 1981 to 2005 GDP grew 4.46 times due to the quickly developing
industry. Labour-intensive industries have gradually been replaced by capital- and
technology-intensive industries, such as the production of chemicals, petrochemicals,
information technology, electrical equipment, and electronics. Chemical products industry
increased 8.68 times9, Machinery and Equipments Manufacturing and Repairing 6.36 times,
Computer, Communications, and Audio and Video Electronic Products Manufacturing
industry 16.12 times, while the fastest growth was observed in Electronic Parts and
Components Manufacturing industry, where the increase was 57.58 times compare in 2005
and 1981. Taiwan was rated No. 5 by the Geneva-based World Economic Forum (WEF) in
its Global Competitiveness Report 2005-2006. It trailed only Finland, the US, Sweden and
Denmark (Ho J. Taiwan losing ground to South Korea, analysts say. Taipei Times, April 7,
2006). In recent years, the largest share of the manufacturing sector has consisted of
electronics and information technology enterprises, becoming a leading supplier of
semiconductors, electronics, communication and other IT products. Now those industries
considered as the key industries, accounting the biggest portion of Taiwan’s GDP (for details,
refer to Appendix 3.1).
Nevertheless, quickly evolving manufacturing sector nurtured the service sector and as result,
there was a fast development in Finance and Insurance Industry (6.90 times), Real Estate,
Rental and Leasing (5.58 times). Growing economy lead to the significant increase in local
consumer buying power as the disposal income grew 3.36 times in 2005 compare to 1981.
Even the average primary income rose substantially, with a rate of primary income growth of
9
This and following numbers are measure in times from 1981 to 2005.
27
3.81 % from 1980 to 2005 (for details refer to Appendix 3.2). All that led to an enormous
growth in Accommodation and Eating-Drinking Places (8.57 times), Health Care and Social
Welfare Services (12.16 times), Cultural, Sporting and Recreational Services (6.21 times).
Consequently, continuous economic growth has created more working places: the number of
income recipients grew almost 2 times from 1981 to 2005, with a constantly rising portion of
female workers as the traditional opinion about woman’s role in the society as a housewife
had been demolished, and more and more females entered Taiwan labour market, as it is
shown in Appendix 3.3.
Furthermore, coming back to Taiwan’s IT and electronics industries, those booming
industries have created many high-tech tycoons, multi-billionaires and high-income
professionals. The accumulation of wealth by local entrepreneurs who own small and
medium-sized enterprises has increased dramatically during the past five years, and the
concept of using luxury goods to demonstrate social status and individuality is widely
accepted by local consumers.
Even though in recent years Taiwan economy is experiencing a slow-down with the GDP
growth rate only 3.3% in 2003, 5.71% in 2004 and 3.63% in 2005, this fact does not neglects
that Taiwanese buying power decreased. On the contrary, now it is more stable.
To conclude, Taiwan’s constant economic growth resulted in the increase of the wealth since
growing industries created more working positions and the demand for employees was rising
pushing up the incomes. In parallel with the growing incomes grew, the needs also became
larger as people could afford more expensive things to make their lives more convenient and
comfortable. Disposal income, consumption expenditure and savings continued the upward
rising tendency with the annual change of -2.56%(disposal income), -0.73% (consumption
expenditure), -7.85% (savings) in 2001 and 0.37%, 1.22%, -2.57% in 2005, proving a good
28
reason for sellers introduce new products and services, however they must be matched with
the consumer tastes and consumption habits. This will be analysed in the later section.
Section 2: Political and Legal Environment
Political and legal environment play a significant role in the society having a direct and
indirect influence on its quality and welfare. Since in many countries education, cultural
activities are supported by the government; therefore, the citizen’s education level and
consequent future positions is partly the government’s merit. Probably no one can disagree
regarding the government’s role managing country’s economy. Moreover, government and its
implemented political system not only influences domestic business decisions, but
international as well since growing importance globalization eliminate the borders many
businesses spreading internationally. Who will decide the rules to conduct the businesses?
The answer is governmental bodies.
Since focus of this thesis is the market entry strategy, it necessary to analyze three aspects of
Taiwan’s government policy: first, its policy towards trade focusing on trade enhancements;
second, its policy towards import, while emphasizing trade restrictions; and finally, tax
system, listing the possible taxes the Lithuanian company might encounter.
Section 2.1: Government Policy towards Trade
Taiwan’s rapid economic development over the past three decades owes a lot to gradually
decreasing investment and foreign trade controls, essentially adopting a more laissez-faire
approach and Taiwanese business people willingness to pursue foreign markets.
29
Foreign trade has been the major reason for the fast Taiwan’s economic development. In
2003, Taiwan remained the world’s 15th largest exporter and 16th largest importer. In 2005
net exports made 9.53 percent of GDP compared to only 3.17 percent in 1981. Increasing
trade volumes, maintaining the trade surplus, lead up country to become one of the world’s
largest holders of foreign reserves. Actually, in 2006 Taiwan held the world’s fifth largest
foreign exchange reserves after Japan, China, United Kingdom and Korea. Major trading
partners include Japan, USA, China, the ASEAN (Association of Southeast Asian Countries),
and European Union; these nations account for approximately 80 percent of Taiwan’s trade
volume.
Seeking to pave the road for globalisation, increasing regional economic integration, and the
formation of free trade areas, Taiwan has been actively joining various trade talks through
international trade organizations like the World Trade Organization, Asia-Pacific Economic
Cooperation, and Organization for Economic Cooperation and Development, and negotiating
with other countries on the signing of free trade agreements (FTAs) for the purpose to create
new trade opportunities and achieve a higher level of economic development. In August 2003
was signed the first FTA with the Republic of Panama, which went into effect on January 1,
2004. As of July 2005, Taiwan had completed three rounds of FTA negotiations with
Guatemala and Nicaragua. Taiwan is also carrying out FTA negotiations with Paraguay and
seeks to sign FTAs with the US, Japan, Singapore, and New Zealand.
To enhance its competitiveness and avoid being marginalized in international supply chains,
Taiwan has formulated plans and promoted the establishment of free trade port zones (FTPZs)
to allow both value-added processing of goods and foreign businesspeople to take advantage
of the island’s manufacturing prowess. The Taiwan’s first FTPZ in Keelung Port started
operation on October 1, 2004, and the second in Kaohsiung Port was launched in January
2005 and the third one in Taichung Port, started operations at the end of 2005.
30
All these facts serve as the evidence that Taiwan’s government promotes foreign trade
recognizing it as one of the success factors of economic growth. The result is prominent:
Taiwan’s economy was integrated into global economy despite the political nuances
concerning China.
Section 2.2: Government Policy towards Import
Although Taiwan's trade rules and regulations are at times quite complicated, it is becoming
easier and more convenient for foreign businessmen and manufacturers to do business with
Taiwan. Thanks to the dedicated efforts and continuing hard work of government, private
enterprise, and trade-related organizations. Rules and regulations have been simplified,
infrastructure facilities improved, and trade services enhanced.
The current Taiwan tariff system, which is based on the Harmonized Commodity Description
and Coding System, features a listing of 10,228 items, of which 9,958 or over 97 percent can
be imported. Of this number, some 9,679, or over 94 percent, can be imported without a
permit. Prior application is, however, necessary for the import of 549 items, with some 406
requiring application to the Board of Foreign Trade (BOFT). The remaining 143 items
require prior application with licensing units such as banks that have been authorized by the
BOFT. The dutiable value of an import is defined as its cost, insurance, and freight (CIF)
value. Moreover, there is no import duty for diamonds, precious stones, pearls, gold and
platinum and there is 5 percent value-added tax (VAT) levied on all products.
Even though Taiwan is not a member of the ATA Carnet system10, the country has signed
bilateral agreements with 25 nations, including the United States, Canada, Switzerland, South
Africa, Singapore, South Korea, New Zealand, Australia, Hungary, the Philippines, and 15
10
The ATA Caret is an international, unified Customs document which, under a series of Customs Conventions,
provides for the temporary duty free admission of three main categories of goods traded internationally.
31
EU countries, to implement ATA Carnet. These agreements grant temporary customs
exemptions for commercial samples, professional equipment and exhibitions goods, which
are brought into Taiwan for sales promotion and exhibition purposes on a temporary basis.
They facilitate international business by avoiding extensive customs procedures, eliminating
payment of import duties and valued-added taxes, and replacing the purchase with temporary
import bonds. Upon conclusion of the event, items must be shipped out of Taiwan within one
year to avoid imposition of tariffs and other import taxes.
In general, Taiwan’s government impose no restrictions to the items that are not subject to
prohibited items section (the list of prohibited items is provided in Appendix 2.5), and
jewelry, including the one containing amber, is not under this section, which makes no
complications to trade.
Section 2.3: Tax System
Tax system is a legal system for accessing and collecting taxes. In Taiwan taxes are classified
as National taxes, where National Tax Administration (NTA) is responsible for the
enforcement, and Municipal Taxes, collected by City or County Tax Offices. All collectable
taxes presented in the following table, however the major taxes for companies are income tax,
business tax, customs duty and commodity tax on certain goods.
32
Table 3.1: Classification of Taxes and Collection Authority.
NTA / National Taxes
Income Tax
Estate and Gift Tax
Business Tax (VAT and Non-VAT)
Commodity Tax
Tobacco and Wine Tax
Securities Transaction Tax
Mining Lot Tax
City or County Tax Office / Municipal Taxes
Land Tax
Building Tax
Deed Tax
Amusement Tax
Stamp Tax
Vehicle License Tax
Source: Deloitte & Touche compile
A. Income Tax (Profit-Seeking Enterprise Tax)
In most countries profit-seeking enterprises are subject to the Income tax. In Taiwan this tax
is called profit-seeking enterprises income tax11. There are some particularities concerning
subsidiaries, joint ventures and branches. A 100-percent foreign owned subsidiary, having
head office in Taiwan, is subject to income tax for its worldwide income. Income taxes paid
in other countries can be used as a foreign tax credit12 to offset its Taiwan income tax liability.
Branches are considered a non-resident for tax purposes and are has to pay tax for its incomes
derived from Taiwan sources.
Taxable income is the net income after deducting all deductable costs, expenses, losses and
taxes. The minimum taxable income, tax brackets, and tax rates for profit-seeking enterprise
income tax are listed in the following table:
11
Income tax is classified into consolidated income tax, which is collected from individuals, in other countries
so called Individual Income Tax, and profit-seeking enterprise income tax, levied on all profit-seeking
enterprises and in other countries called Income Tax.
12
Investment tax credit of 20% is available for corporation in order for them to balance distribution in various
geographical areas.
33
Table 3.2: Corporate income rates.
Taxable income bracket (NTD)
Under $50,000
$50,000-$100,000
Over $100,000
Tax rate (%)
None
15% of total taxable income but the income
tax liability shall not exceed 50% of the
portion of taxable income over $50,000
25% on the portion of taxable income over
$100,000
B. Individual Income Tax
This tax is levied on resident and non-resident individuals, whose income derived from
Taiwan sources per calendar year. Individuals are considered residents in Taiwan for tax
purpose if they are Taiwan nationals or if they are foreign nationals who reside in Taiwan for
at least 183 days within a calendar year. Individuals are considered non-residents in Taiwan if
they are foreign nationals who stay in Taiwan for less than 183 days within a calendar year.
In general, non-resident taxpayers are not entitled to personal exemptions and deductions.
Their income taxes are computed on gross income and taxes are collected through
withholding at source and through other procedures stated in the Income Tax Law. The
withholding tax rate is generally 20%.
Resident individuals’ net taxable incomes are subject to the following progressive tax rates.
34
Table 3.3: Individuals’ net taxable income rates.
Net Taxable Income (NTD)
0 to 370,000
370,001 to 990,000
990,001 to 1,980,000
1,980,001 to 3,720,000
3,720,001 and above
Tax Rate
6%
13%
21%
30%
40%
Progressive Difference (NTD)
25,900
25,900
105,100
283,300
655,300
C. Customs Duty
The customs duty is imposed based on Customs Law and regulations announced by Ministry
of Finance. Basically, Taiwan customs mechanism, including valuation and classification
follows World Trade Organization (WTO) rules.
The duty-payer can be the consignee of the imported goods, or the bearer of the bill of lading,
or the holder of the imported goods.
Documents needed to be submit to Customs upon import declaration:
•
Import declaration form
•
Bill of lading
•
Invoice
•
Loading lists, booking notes, packing list
•
Import permit
•
Certificates of inspection
•
Other related documents.
The customs value of imported goods is subject to ad valorem of duties and value is assessed
based on the transaction price actually paid or payable by the buyer adding the following
elements:
•
Movement costs, such as ocean freight and insurance;
35
•
Goods or services provided by the buyer for the use of the seller for production or
selling the import goods, such as direct and indirect materials, parts, tools, mold,
equipment, etc.
•
Engineering, design or other similar services for producing the import goods outside
Taiwan; and
•
Royalty or commission paid by the buyer according to the terms of transaction of the
import goods.
In order to convert foreign prices for imported products used the exchange rate that is
currently published or approved by the relevant foreign exchange authorities.
Since Lithuania is a member of World Trade Organization and as displayed in Appendix 3.6
amber jewelry is not taxed custom duties. Moreover, from the same table the discussed
product is referred to as “non duty drawback” category, which implies other taxes except
Business Tax during the import clearance are not applied. Therefore, commodity tax, which
is levied on particular products, will not be discussed.
In general, in Taiwan the regulations of customs duty are quite similar to other countries’
regulations. The main concern here is the amount has to be paid to customs, which is zero in
this case, increasing the motivation to trade.
D. Business Tax
Business tax (BT) belongs to the indirect taxes and divided into two categories: value-added
tax (VAT) and non-value-added tax and is levied on the sale of goods or services within the
territory of the Republic of China (R.O.C.) and the import of goods. The taxpayers of BT are:
seller – for the goods and services sold; receivers or holder of imported products.
36
There are some nuances regarding the imported goods. Since imports are also taxed import
duties, therefore, BT on imported goods has to be calculated at the tax rate based on the total
amount of duty-paying value and customs duty. Since amber jewellery does not fall under the
category of tobacco and alcohol, thus, importing them BT should be equal to:
BT for imported goods = (DPV + import duty + commodity tax) x applicable collection rate.
Where DPV refers duty-paying value, import duty equal to 0%, commodity tax equal to 0%,
applicable collection rate equals to 5%.
As mentioned before, the taxpayer of BT is whether a seller of goods and services or
receivers/holders of imported goods. The business tax rate shall be no less than 5% and no
more than 10%, except for the enterprises, such as financial institutions, small-scale
companies, and certain restaurants, that fall under special BT system, where the tax ranges
from 0.1% to 25%.
BT is calculated based on all sales amounts of goods and services and all rates are presented
in the following table.
Table 3.4: Business tax rates.
Payer
Saloons and tea rooms, coffee shops and bars providing hostesses to entertain
customers
Night clubs or restaurants providing entertaining show programs
Banks, insurance companies, trust and investment companies, securities
traders, futures traders, financing companies and pawnshops
Reinsurance premium income earners and small-scale businesses13
Wholesalers and small-scale businesses selling farm products
All other operations
Tax Rate
25%
15%
2%
1%
0.1%
5%
13
According to “Standards for Identifying Small and Medium-sized Enterprises” the term "small-scale
enterprise" refers to those small-medium enterprises, where the number of regular employees must be less than
5.
37
This thesis discusses only taxes that the company most probable will have to bear. Others are
not included in the discussion.
To conclude, depending on the entry a Lithuanian company will be taxed income tax
(corporate and individual), business tax, and customs duty. When entry the first time it is
important to find out the minimum mix of the mentioned taxes since the company cannot
expect large sales volumes in the beginning.
38
Section 3: Competitive Environment
The majority of fine jewellery and materials comes almost exclusively from imports, so as
the demand is nurtured from foreign supplies. The local fine jewellery industry is less
competitive, and is hard pressed to survive in the face of keen competition from imported and
branded fine jewellery that offers excellent quality, better precious stones, and superior
design and craftsmanship. On the other hand, Taiwan is considered as the world’s largest
centre for the processing semiprecious stones and has some of the most advanced cutting and
processing operations in the world for semiprecious stones.
Imports of fine jewellery, diamonds, gemstones, pearls and precious metals have accounted
for over 95 percent of the total market in Taiwan in recent years. The 2006 imports of fine
jewellery are estimated of US$1,489 million, an increase of 26 percent from imports of
US$1,177 million in 2005. Imports of gold and precious metals accounted for 50 percent of
total imports, or US$612 million in 2005, and are projected to grow to US$745 million in
2006. Diamonds are the second largest import segment of fine jewellery, with about 35
percent of the total annual imports amounting to US$405 million in 2005, followed by
precious gemstones and pearls, accounting for about 15 percent of the total imports.
In 2005 Asian suppliers carried about 70 percent of the total market of fine jewellery in
Taiwan, amounting to approximately US$800 million, followed by European suppliers with a
13 percent share (US$149 million) and suppliers from South and Central America with a nine
percent share (US$102 million). Imports of fine jewellery from the United States shared
about eight percent of the total market amounting to US$91 million in 2005, an increase of 18
percent from 2004. Hong Kong, Thailand, India, Mainland China and Sri Lanka are the
largest suppliers of diamonds, gemstones and gold accessories. Japan and Mainland China are
important suppliers of pearls and precious metals, while France, Italy and the United States
39
are top-end fine jewellery suppliers. Other major foreign suppliers in the market are Brazil,
Chile and Tahiti.
Imported and branded fine jewellery have dominated the local market in Taiwan. Industry
experts estimate that imports of fine jewellery are expected to continue increasing at about 20
percent per annum for the next two years. American-branded fine jewellery enjoys wide
recognition among local consumers. U.S. brands as well as brands from European countries
are considered to be high-end fine jewellery, well known for excellent designs and quality.
European brands have enjoyed brisk sales for years, and Japanese brands have been noted for
their excellent quality pearls. Well-known U.S. brands of fine jewellery sold in the market are:
Tiffany, Harry Winston and Hearts on Fire. Famous top-end fine jewellery brands from other
countries are: Chanel, Cartier, Dior, Hermes’s, Louis Vuitton, De Beers, Van Cleef & Arpels,
Boucheron (France); Gucci, Bvlgari (Italy) Georg Jensen (Denmark), and Mikimoto (Japan).
40
Section 4: Local Customer Demand Analysis
Continuously rising incomes, relatively high GNP per capital (USD 16,471 in 2006) and PPT
(USD 24,676 in 2004) leaves some proportion to spend on other than necessities, which
includes jewellery to represent personal wealth, social status and individuality. Remembering
the Maslow’s Hierarchy of Needs, Taiwanese are climbing up since their lower needs have
been satisfied. This climbing up can be interpreted as the fact that some find jewelry as the
way to express themselves.
As mentioned in the Introduction, it is hard to find information regarding the amber jewelry
demand, therefore other jewelry (diamonds and gold) has been chosen to visualize the
potentiality of the market for amber jewelry.
Section 4.1: Market Size and Its Features
Taiwan’s female consumers are recognized as the third largest consumer group in the world
that purchase diamonds and fine jewellery for themselves, following only women in Saudi
Arabia and India. The annual market for fine jewellery in Taiwan amounted to US$1,143
million in 2005, which is an increase of 23 percent from US$938 million in 2004 (more
detailed information is displayed in Appendix 2.7). Many companies selling international
brands of fine jewellery noted the market potential for fine jewellery. During the past five
years, new stores continue to open and routinely host private jewellery shows for their VIP
consumers. On average, the female diamond owner has three diamonds.
In Taiwan, 24K gold accessories and diamond rings are the first choice of local fine jewellery
consumers, followed by rubies, sapphires, emeralds and green jade. Different from European
and American customers, Taiwanese prefer 24K gold accessories, which have been the most
41
popular fine jewellery sales items, accounting for 35 – 45 percent of annual purchases of fine
jewellery, and amounted to US$518 million in 2005. Chinese people have always had a
penchant for gold. Traditionally, 24K gold accessories have figured prominently at weddings,
birthday parties for elderly and are widely used as a valuable present for newborn babies. For
many years, 24K gold accessories were the largest segment of the fine jewellery market in
Taiwan, followed by diamonds, precious gemstones and pearls. The estimated market for
gold accessories and diamond jewellery in Taiwan was about US$1,000 million during the
past two years 18K gold or 14K gold accessories, rings, pendants and earrings without or
with diamonds, sapphires, emeralds, pearls or green jade are also popular in the market. For
the mass market of fine jewellery, diamond weights of 0.3 to 0.5 carat are the most popular
sizes and have been successfully sold for many years. Diamonds and precious gemstones
with white 14K or 18K gold settings are still the market leaders. Diversified designs and
affordable price are important as consumption increases for younger consumers. The targeted
consumer for 14k or 18K gold accessories and rings with small diamonds or gemstones is
focused on the working group aged from 22 to 35, with an average monthly income of
US$1,500 or more. The local population in this age segment totals about 2,100,000. It is
expected that gold accessories and diamond jewellery will continue dominating the market
trend for the next few years. In addition, more and more young people in their twenties with
steady incomes are willing to purchase fine jewellery to satisfy their personal desires. In 2005
over 45 percent of Taiwanese aged 20 to 44 owned diamonds, and increase from 8 percent in
1994.
During the past five years, branded premium fine jewellery has experienced a significant
increase of market share. Taiwanese collectors and end-users of premium fine jewellery are
very sophisticated and knowledgeable. They are known for their high interest in collecting
unique fine jewellery and high quality gemstones with perfect designs, made by skilled
42
craftsmen. Their purposes for buying well known branded fine jewellery include: personal
preference, preserving personal wealth, increasing investments and allocating property
arrangements.
Due to the increase of personal disposable income, and more international exposure through
travel and the Internet, the attitude of local consumers towards purchasing jewellery has been
changing from necessity (for wedding etc.) to individuality and lifestyle. Fine jewellery is
now presumed a necessity, especially for wealthy Taiwanese women. Diamond rings and
gold accessories are the most popular items of fine jewellery for local consumers, particularly
for young working women aged 22 to 35.
The most important sales seasons are Valentines Day in February or Chinese Valentines Day
in July, wedding seasons before Chinese New Year (every January or February). Every year
about 130,000 to 145,000 new couples are married. As a tradition, gold accessories and
diamond rings are necessary wedding items for new couples. The estimated average purchase
budget for fine jewellery for a new couple is around NT$50,000 to 100,000 (equivalent to
US$1,500 to 3,000). The budget includes both engagement and wedding rings and
accessories. A ring with diamond(s) is widely used as a wedding ring, particularly for the
bride. The most popular size of diamonds for wedding rings is from 0.5 karat to 1 karat. The
fine jewellery market for new couples is estimated to be approximately US$250 million to
US$400 million per year.
Upscale Taiwanese are very trendy and love branded fine jewellery. High-income consumers
of fine jewellery prefer larger size diamonds from one karat to three karats, or seek
gemstones in weight from three karats to ten karats or more. Limited collection pieces of
branded fine jewellery are now very popular, due to the strong buying power of affluent
Taiwanese consumers, and the sophisticated retailing environment. As a result many top-end
international brands of fine jewellery have targeted Taiwan as a hot growth market in Asia.
43
Section 4.2: Major Sales Channels and End-User Profile
The biggest cities in Taiwan, Taipei, Taichung, Tainan and Kaohsiung, has the highest sales
potential for fine jewellery due to higher standards of living and higher disposable incomes.
The consumers of fine jewellery can be classified into several groups: brand-oriented,
quality-oriented and price-oriented. The non-brand-conscious consumers usually purchase
jewellery at local jewellery stores or traditional markets. Smart consumers will turn to
reputable local importers or jewellery wholesalers as purchasing sources. The last group,
categorized as brand-conscious consumers, prefer to conduct their purchases in a private,
pleasant and safe environment. Most well known international brands of fine jewellery, such
as Tiffany, Harry Winston, Chanel, Cartier, Hermes, Louis Vuitton, and Hearts on Fire have
offices or agents handling their business. They typically open boutiques for fine jewellery in
five-star hotels or upscale shopping centres, such as Taipei 101, Shinkong Mitsukoshi.
Regular buyers of high-end branded fine jewellery are local business tycoons, wealthy
entrepreneurs, jewellery collectors and high-income professionals. In addition, private
auctions and domestic jewellery shows are additional sources for fine jewellery. Recently TV
shopping channels and the Internet become more popular to obtain the fine jewellery.
In terms of geographical distribution, the Taipei area, with a total population of 2.6 million is
considered as the key market for fine jewellery not only because of the largest number of
income recipients (1.5 million, which accounts of about 12.57 percent of total income
recipients in Taiwan) but as well due to the major cluster of high-income professionals,
wealthy entrepreneurs and jewellery collectors. Taipei city accounts about 50 to 60 percent of
the total market for fine jewellery, and amounted to approximately US$600 million to 700
million in recent years. Consumer decision is influenced by the price, designs and brand
44
popularity. In addition, promotion events including attractive advertisements are important to
stimulate consumption by consumers to achieve successful sales.
In general, the highest revenues are generated from high-end branded jewellery, whose the
main buyers are high-income people. Due to the economic circumstances, Taiwan’s most
developed district Taipei carries the majority sales of fine jewellery since there the income
level is higher compared to the rest part of Taiwan.
45
Section 5: Amber Jewellery Market in Taiwan
Three companies engaged in amber jewellery import-retail were surveyed. The results of this
research showed that companies are very different in their strategies, thus they are analyzed
separately in the following three sections, while the latest section provides the summary of
findings.
Section 5.1: Amber House
It is a subsidiary of the Danish company named as Amber House, which was founded in 1933
by Einer Fehrn and situated in Copenhagen, Denmark. Later in 1962 the son of the founder,
Søren Fehrn joined the family business. He was the one, who collected interesting amber
pieces and items especially the ones with inclusions. The collection became publicly
available in 1994 with the establishment of Amber Museum.
Nevertheless, before that around 1990 the subsidiary company was established in Taiwan, on
the second floor in the Mall of the Far Eastern Hotel. The parent company buys amber from
Russia, processes it and sells in Denmark or exports to foreign countries, including the shop
in Taiwan. Taiwanese subsidiary does not have decision-making right as all strategic
decisions are made by the Danish company, which was the one to determine to open boutique
even it did not have any market information before opening, in addition decides which
products to sell and sets the prices. Products are vary from small rings and figurines, costing
from NTD1000 – 2000, to unique large pieces of amber, amber trees and large figurines,
costing several thousands of New Taiwan Dollars. The most popular products are bracelets
and it is very hard to find the buyer for the bigger and more expensive items. However, even
so called most popular products are bought not very often, just few items per month. The
46
reason is that shops main customers are businessmen, who due to the changing economic
environment, are moving to China and as a result Amber House, Taiwan lost its major
clientele.
Usually the clients are buying for themselves or as a present. Despite the fact that it has more
than 10 years of operating here, the firm never did advertising campaigns, and it recognizes
the customer knowledge about the amber rather little. However, promotional costs are too
high even for expensive sold items.
Section 5.2: Mirror International Jewellery Store
Mirror International Jewellery Store or just Mirror is well known Taiwanese jewellery
company, established in 1997. Having a long operating experience in Taiwan market,
however, it is more known not for its amber jewellery selection, but for diamond, pearl and
jade jewellery. However, its collection holds very nice Polish amber products, such as rings,
earrings, bracelets, necklaces, which been started importing about 8 years ago and is pretty
satisfied with the sales, even though customer know little about amber jewellery. This
success is related with the advertising activities and booth attendants’ efforts. Mirror employs
celebrities to promote its products. Shop attendants on their hand kindly introduce specific of
amber, distribute small leaflets, where clients can get to know the meaning of different amber
colours associated with the wealth, health and success.
Company’s offering will attract customers from the age of 20 to 60 years old, who mainly
buy bracelets and the purpose of their purchase is for their needs or as a gift.
Section 5.3: Laluna stg. Silver Jewelry
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Laluna is the small Taiwanese jewellery shop located in Taipei Station Front Metro Mall. It is
owned by Mrs. Joyce Chang (張秀選), which is also selling her products. The firm directly
imports amber jewellery from Poland to sell in Taiwan and it is been already 15 years since it
started import operations. However before that, no market research was done, just relying on
general economy boom. And after it is over, sales slowed down.
Laluna’s main customers are office ladies at the age of 40 – 50 years; therefore, the product
assortment is matched with their tastes, which are earrings, rings, necklaces and other
jewellery. Prices target medium income customer and vary from several hundreds New
Taiwan Dollars to several thousands. They are determined regarding the suppliers price
adding up VAT. Even though customers know little about Laluna’s amber jewelry, the
company does not do any promotional activities and rely on its old clientele.
Section 5.4: Summary of Findings
The product suggests that the customers are not low-income and to win mid- to upper-income
clientele the company must particularly focus on marketing activities and find the right match
between the elements of marketing mix. The goal of this section is to summarize the findings
from research, which was done interviewing companies selling amber jewellery in Taiwan.
The summary of findings is presented in Table 3.5.
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Table 3.5: Summary of Findings.
Company
Amber House
Mirror
International Laluna stg. Silver
Jewellery Store
Jewellery
Experience
18 years
8 years
15 years
Store Location
Far Eastern Mall
Taipei 101
Taipei Main Station
Business Considerations
Metro Mall
Information
prior No
Offering
No
Satisfactory
Slow
Poland
Poland
import
Current
Business Slow
Situation
Product Origin
Denmark
Prices
From NTD1000 – From few thousands From
2000 to
Promotion
Not available
Most Popular Items
several to several thousand hundred to several
thousands of NTD
NTD
thousand NTD
Bracelets
Bracelets
Earrings,
rings,
necklaces
Promotional Activities
No
Yes
No
Segment
High-income
20 to 60 years old
Office ladies at the
businessmen
Customer
several
age of 40 – 50 years
Buying Motives
Gifts
Gifts, themselves
Gifts, themselves
Customer Information
Little
Little
Little
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From the table many sections are quite similar: all companies have an extensive operating
experience, customer is also similar; however, the results of operations are different. The
observed differences are in the following rows: store location, prices and promotion.
Probably the only shop from the ones observed can enjoy satisfactory outcome that is Mirror.
It is established in Taipei 101; this is the place, which appeals to a wide range of customers
and definitely including mid- to upper-income as there are many boutiques presenting worldknown brands. Furthermore, the company is actively engaged promoting its products not only
applying promotional activities, but also emphasizing concern towards society and holds
various activities in order to achieve even better public exposure.
The other two firms have not found the right match between the elements of marketing mix:
Laluna’s offering price is affordable, but the location where it set up the shop definitely does
not suit to present amber jewelry; in this case there is a mismatch between the offering
positioning and the location. Amber House target segment is high-income customer, however,
when interviewing there seemed the company gave up and sees not reasonable to run
promotional activities.
To conclude, the interviewed companies are Taiwanese firms having sufficient market
experience; foreign companies have not stepped in this niche. This is an important
observation raising the question why is like that? The single answer can be found here is in
order to bypass cultural differences foreign firms left local ones to deal with the end user. The
second consideration is related to the business results: why two companies face slow demand,
while Mirror is able to enjoy satisfactory outcome? The answer is the proper marketing
activities. To answer the above questions, the following chapters discuss the alternatives for
the entry strategy; and then analyze basic marketing questions to find the appropriate mix
between marketing elements.
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Previous chapters described the selected offering and presented characteristics of the import
market. Being more detailed Chapter 2 depicted characteristics of the product, its
classification, history and location, manufacturing, utilization, export market supply and
competitiveness; while Chapter 3 analyzed import market features: its economic, political and
legal, competitive environment, the specifics of customer and selling channels, current
situation of potential competitors.
Based on the on the above mentioned information, later chapters address strategic issues:
market entry strategy and problems associated to the marketing.
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