Little guys struggle in the land of the giants
Small companies battle for survival in retail with spiraling rental prices
Hong Kong has developed a reputation as a mecca for retail. The city has attracted tourists from around the world and legions of shoppers from mainland China.
But questions persist about an industry which is predicted to grow by at least 4% to HK$465 billion (US$59.3 billion), according to PwC or PricewaterhouseCoopers, one of the world’s big four auditors.
At the center of this sector is retail sales of food and beverages, which reached $11.9 billion “with supermarkets accounting for 55%” of the market, a study by Euromonitor showed.
Two grocery groups, Dairy Farm International’s Wellcome and AS Watsons’ ParknShop, dominated the scene, accounting for about 75% of the revenue.
So is there real choice in Hong Kong?
Asia Times asked a panel of experts – Ho Hei-wah, a veteran social activist and director of the Society for Community Organization, Quentin Cheng, an outspoken spokesman for the Public Transport Research Team, Neville Sarony, a Queen’s Counsel and former Professor of Law at the City University of Hong Kong and a contributor to Asia Times, and Wu Chi-wai, a legislator and the chairman of Democratic Party – for their views.
How would you describe the retail sector and what has been the impact of shoppers from the mainland?
Ho: “There is a monopoly in Hong Kong’s retail sector as the two large supermarket chains, Park’n Shop and Wellcome, dominate the supermarket sector, while most of our pharmacies belong to Watsons and Mannings. The elements of monopoly exist in different industries, resulting in expensive goods and services.”
Cheng: “Obviously, mainland tourists come to shop in Hong Kong, making everything more expensive.”
Sarony: “Retail sales are predominantly for designer brands and reliable food and medicine. Surely that tells you that what these people [mainland shoppers] are buying is reliability, something they cannot get at home.”
Are small and medium-sized businesses being forced out the market?
Ho: You will notice that small shops charge very little for the same products sold at a much higher price in large stores. But the small shops cannot survive as the major chains will use pricing strategies to force them out of business. Once they have gone, the [big players simply] inflate prices again.”
Sarony: “The traditional and family businesses are squeezed out and in their place come the designer brands, more and more of them. And what the name brands don’t take, the gold shops do. Just count the number of gold shops along Nathan Road [which runs from Tsim Sha Tsui to Sham Shui Po across Hong Kong harbor in Kowloon]? [Then, of course,] the duopoly of Park’n Shop and Wellcome is, if I may pun badly, most unwelcome. We pay ludicrously high prices for mediocre produce. The only bright light in this field is Marks & Spencer whose food is of consistently high quality: but at a price.
Wu: “I don’t think it is bad for consumers. In the past, people bought food in wet markets, now they are able to access big supermarkets with clean surroundings and yet their range of options have not changed.”
What are the reasons behind what many Hong Kong consumers feel is the demise of the small retailer?
Sarony: “Small and medium retail businesses are closing down because landlords raise rents at a grossly disproportionate percentage. If you are both a real estate giant and major gold retailer, how much more powerful can you get? How much, if any of these mind-blowing profits, is re-invested in Hong Kong other than more phallic symbols in concrete?”
Wu: “It is natural that ‘big fish eat small fish’, it is a trend.”
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