【A Must-Read for Those Opening Shops in Taiwan】Two Common Characteristics of Shops That Often Fail in Taiwan

Hello, I’m Leo Sato (@slamdunk772), the CEO of applemint, a digital marketing agency in Taiwan!

Recently, I lost track of how many years I’ve been living in Taiwan, and when I counted, I realized that I’ve been here for about 9-10 years. During about six of those years, I ran a business in Taiwan, worked for a local company for one year, and spent 2.5 years in graduate school and working on breaks.

I first came to Taiwan 11 years ago in 2010, and I remember that at that time, there were hardly any Japanese restaurants

Now, after 10 years, how did the number of Japanese restaurants in Taipei skyrocket? However, Japanese companies that withdraw their restaurants from Taiwan are also endless.

For example, from around 2013 to 2018, many ramen shops entered Taiwan and then left. Many shops can conquer the northern part but struggle to conquer the southern part.

To Succeed in Taiwan’s Food and Beverage Industry ~ Why Are Japanese Ramen Shops Withdrawing One After Another? (Part 1)

Today, while I was walking near the office, I saw a shop closed. Why do shops fail in Taiwan?

I think shops that fail are destined to fail, and those that don’t fail are avoiding failure. In short, failing shops have something in common.

Today, I want to talk about the common characteristics of failing shops that I have observed during my 9-10 years in Taiwan. Since this is just my opinion, I don’t know if it’s 100% correct, but I’ve been running a business in Taiwan for seven years now, without any investment from anyone.

This is my perspective on achieving results from scratch, so I think it’s worth considering.

No. 1: Not Studying Successful Shops and Not Imitating Them

A drink shop near the office closed down some time ago. This shop had a cute logo and a very stylish interior (see below):

Reference: From Google 

But it closed down. Why do you think that is? I think the reason this shop failed is that it didn’t imitate the strengths of other drink shops, and more specifically, it didn’t sell drinks accessibly on the street.

There are plenty of drink shops in Taiwan. All of them face the sidewalk, and customers can buy drinks directly at the window.

This shop disregarded that and created an entrance instead, and even a space inside the store where customers could drink. I think this wasn’t a good idea because you couldn’t buy drinks without entering the store.

In other words, here, compared to other shops, there was an extra step of “entering” before purchasing. I think this significantly reduced the number of buyers.

For those who want to start a shop in Taiwan in the future, I recommend researching similar types of shops before starting. It would be good to break down each thriving shop and understand why it is thriving.

For example, does 50 Lan (50嵐), which operates many drink stands in Taiwan, have an entrance? Do they have a space for eating inside the store?

Most likely not, right? Failing shops usually don’t study other companies and try to differentiate themselves unnecessarily.

If customers don’t perceive the different approach as a benefit, it’s meaningless. I think the idea of “doing something because no one else is doing it!” or “I’m going to do something different from others!” is the most dangerous in business.

Most likely, if it’s not around anymore, it’s because someone tried it in the past and it didn’t work out.

No. 2: Luxurious Interior

As I mentioned in a previous blog, there are very few success stories in restaurants with luxurious interiors.

Why is that? It lies in the business model and profit structure of restaurants. Generally, there are only two ways for restaurants to increase profits:

Increase the number of directly managed stores

Increase the number of franchise stores

Increasing directly managed stores means increasing the number of stores you manage yourself. In other words, expanding your managed stores.

Franchising is the same in terms of increasing the number of stores, but in this case, you pass manuals and recipes to others, leave the store to them, and receive fees to increase profits.

There are also cases where you manage only one store and increase profits. In this case, I think you need to aim for Michelin stars or upscale restaurants.

So why don’t restaurants with luxurious interiors succeed?

First, if you try to expand your directly managed stores by spending too much money on the interior, the initial cost of the interior of the next store will be very heavy.

Second, the method of leaving the store to someone else with franchising also does not work if the initial cost of the interior is too high and no one wants to do it…

In franchise, usually, the person who starts has to bear the initial cost.

In other words, if you want to make the interior luxurious, you need to aim for a restaurant or dish where you can raise the average customer spending in advance.

Conclusion

To sum up, I think there are two common points of shops that often fail in Taiwan:

First, failing shops often don’t study thriving shops.

Second, they make the interior too luxurious.

However, please note that there are naturally shops that don’t study other shops and make the interior luxurious but still sell well, and I think that’s just luck.

Personally, I think the probability of success decreases if you don’t follow the manual in business…

By the way, I refer to the gross profit margin, operating profit margin, advertising and promotion expenses of competing companies (listed companies) as benchmarks for my company. I also look at sales by segment.

Why don’t you take another look at the successful shops in your business?

That’s all from Sato, representing applemint!