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Taiwan's claw game outlets nearly double in two years to over 6,000: MOF

The phenomenon is sending a disquieting signal to local economists

Taiwan's claw game outlets nearly double in two years to over 6,000: MOF

A claw game store in Taipei City

(Taiwan News photo)

TAIPEI (Taiwan News) - Claw game stores have begun sprouting up across Taiwan since last year, with outlets growing exponentially in merely one year to total 6,409 by May 2018, according to a report released by the Ministry of Finance (MOF).

The claw game business has also become the fourth largest business in the country's entertainment industry in terms of amusement tax income, surpassing show biz, internet cafe, and box office. Golf (golf course and golf practice range), karaoke, and computer games remain the top three businesses in 2018.

The report indicates that the number of the registered claw game outlets has skyrocketed in recent years. There are 6,409 registered outlets across the country as of May, 2018, nearly doubling in two years and increasing fourfold in eight years. In 2010, there were only 1,261 outlets in the country.

The figure below illustrates the number of claw game outlets which are subject to amusement tax between 2010 and May 2018:

Taiwan's claw game outlets nearly double in two years to over 6,000: MOF
(data source: Ministry of Finance; chart compiled by Taiwan News)

According to an earlier report, 2,037 outlets across the country garnered NT$798 million in tax revenue during the first ten months of 2017, becoming the fourth largest source of tax income in entertainment industry.

The phenomenon is also sending a disquieting signal to local economists, as most of the stores come at the expense of jobs.

As claw game outlets continue their rampant growth, many traditional retailers like those who sell mobile phone parts, shoes and clothes, as well as restaurants, are forced to close because they are either facing rising rental prices or increased labor costs following the labor law amendment in late 2016. The retailers and restaurant owners who can't breakeven choose to end their business, meaning many people will be put out of work amid the closures.

Experts blame high rental and housing prices as the main culprit. The landlord, on the other hand, turn to claw machine stores, which are mostly unmanned and run 24 hours a day, as the profit has looked good so far and they can afford the rent.

A marketing expert explains the popularity of the claw game stores from its unique business model, and consumer behavior.

Since 2016, the business model of the stores started to change in Taiwan. Instead of cutting rent, landlords would lease office space to several claw machine owners, or the tenant would sublet shop space to several other claw machine owners, reducing barriers to investment. For example, a claw game shop in Taipei City might accommodate up to 20 or higher claw machine owners and each would just need to pay NT$5,000 (US$165) per month to get a space to draw in customers to play.

Many people at different ages have been drawn in to invest in the machines and the stores over the past few years, as the fixed operating cost is far lower than a physical retail store. Claw machine owners don't need to spend money on decoration and staff. Players are coming for the prizes, not the services.

For players, according to iSURVEY, the small pleasures of playing the game with only a few NT$10 coins "will leave no harm" and they can feel a sense of achievement if they can successfully claw the prizes. This means a lot more for players when the country has been struggling with a sluggish economy for a long period of time.

Read More: Five unusual claw game prizes in Taiwan