Twilight of the tycoons, cont’d

Perhaps the most surprising thing about the abrupt ending of the Great 2012 By-Elections Bill Filibuster Outrage is that Legislative Council president Tsang Yok-shing didn’t push his emergency ‘halt’ button sooner. It is possible to draw all sorts of depressing conclusions, and we haven’t heard the last of it, and it’s a Friday – so we turn to some arguably more cheerful news, which only the exceptionally alert among us noticed a few days ago.

Supermarket chain Park N Shop is pulling out of Shanghai; at its peak, it had 21 outlets in the city. They say they will be back, but it seems they have an uphill struggle ahead of them. The retailer has had problems adapting

“ParknShop started out as a standard supermarket, which was effective in Hong Kong because of limited space and high rental fees,” said an executive from a local supermarket. “But that model does not apply well in China, where hypermarkets are the norm. ParknShop has not been able to adapt to that norm,” he added.

As all shoppers in the Big Lychee know, this part of Li Ka-shing’s sprawling business empire shares a near-duopoly with Jardine’s Wellcome. The two players’ prices often fluctuate in tandem, suggesting that either they are engaged in cut-throat competition with each other, or they are colluding to keep prices up – or (I have a sneaking but unfounded suspicion) they maintain a semi-rigged but not overly exploitative blend of the two designed to rip us off gently but forever. We do know for a fact that they lean on wholesalers not to supply independent stores that undercut the big boys, an act that would be completely illegal in most developed capitalist markets.

These store closures could be part of an industry-wide consolidation affecting lots of other big merchants. But reading between the lines of the news reports on this (also here and here) it is hard to avoid coming to the conclusion that Park N Shop’s main problem in Shanghai was that it couldn’t handle a market where space is affordable and competitors are allowed to exist. At least they tried: the other conglomerates that dominate Hong Kong’s consumer market mostly don’t even bother expanding operations overseas, no doubt knowing they wouldn’t last five minutes. Amusingly, one of the companies beating the Hutchison subsidiary in Shanghai is the French Carrefour chain – which failed in Hong Kong essentially because our property and retail cartels froze it out.

Global Times points out that Park N Shop still does well in Guangzhou. Presumably the chain established itself in the Pearl River Delta at an earlier stage, and local consumers were and are very familiar with the brand from watching Hong Kong TV. That’s a nice-size region to complement the mature Hong Kong market, but letting Carrefour, Walmart et al have the other 90% of the country to themselves is hardly what we would expect of our beloved ‘Superman’.

I think Ming Pao mentioned this story, but I don’t recall seeing it feature prominently – or at all – in much mainstream Hong Kong press. (It’s there, but hardly obvious.) Even if the closure of a couple of stores is relatively trivial, Li Ka-shing is always worth a few column inches. Perhaps we are seeing a bit of Hong Kong’s famous media self-censorship here: Park N Shop is a huge advertiser, as are several other Hutchison/Cheung Kong retail, property and telecoms interests.

And we wouldn’t want to read too much into it, would we? CY Leung usurps the Chief Executive quasi-election at the last minute; anti-graft police kick Henry Tang’s basement door down at midnight; Sun Hung Kai’s Kwok brothers are led off in handcuffs; and now… KS Li’s Mainland empire mysteriously disintegrates. On what happier note can we declare the weekend open?

 

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10 Responses to Twilight of the tycoons, cont’d

  1. Joe Blow says:

    The cheese at the cheese counter of Citisuper is only half the price of the pre-packaged rubbish at Wellcome.

  2. Completely Unprepared Bela Lugosi says:

    Well of course you ought to read a lot into it. The same things are happening but the impetus is coming from elsewhere and the direction the victims are going is different too. The civil servants think that if they complain about staff morale they will get more money. No, they will get redundancy notices. Li Ka Shing may complain about an unfavourable business environment and he gets his shops closed down.

    Forget about cheese – it’s the coffee cartel that really cleans up in Hong Kong. At a rare independent supermarket here you can pick up a kilo bag of ground coffee for a hundred dollars. Meanwhile, Wellcome and ParkNShop have the same prices: 60 dollars and more for 200 grams. I think they sell the sweepings to Starbucks so they can make their coffee-flavoured water.

    Let’s organize a coffee boycott!

    P.S.: Be careful writing about Li. Strange men may start following you about and your doorstep may be covered in entrails.

  3. maugrim says:

    Strange isnt it? Putonghua speakers (tick), knowledge of the market and its cultural nuances (tick), clout with Mainland politicians (tick). One wonders how Walmart got its 700 stores going given the above. Strange also, I witnessed a Kai Bo Supermarket, who perhaps could not afford our rising rents, having since been replaced by a PnS, despite a large established branch existing some 400 metres away. Must be a very successful company to be able to thrive under such a cost regime as exists in HK.

  4. Joe Blow says:

    PrizeMart paralel-imports foodstuff from overseas. Excellent Italian olive oil at way-below prices (even Italians go there).

  5. Tiu Fu Fong says:

    Irrelevant to today’s topic, from the juicy headlines of The Standard, regarding “man hunter” Lau:

    “Also in the cache were four disposable cameras and 61,200 sexy photos of people including artists and civil servants.” (http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=122571&sid=36438786&con_type=1)

    Sexy photos of male civil servants? Surely a tautology…

  6. gweipo says:

    sounds like things are on the up and up in HK! darn I get to miss the happy times. I even saw a few shots of blue skies recently.

  7. Real Tax Payer says:

    I think Hemlock is correct : SH does allow fair competition (meaning competition that at least does not blatantly favour our HK monopolies/ duopolies)

    I have noticed a lot of 7-11’s in Guangzhou, but in SH (and nearly all many other Chinese cities outside GD) there are local variants of 24 hour convenience stores – often several competing chains.

    Obviously PnS and Wellcome do collude on prices but I think they are clever enough to cover their tracks. I did once see someone walking round a PnS studiously writing down the price of every item

    PS: @ TFF – I wonder if Lau has any T-thong pics of enery. Now that would be some “lower region” evidence I’m sure the ICAC would love to get their hands on (just a figure of speech) and finally it would answer the one question we all want to have answered : does enery actually have any ( I mean a basement, not what you’re thinking) . No wonder he is objecting to the ICAC probing down below.

  8. Regislea says:

    “Sexy photos of male civil servants – more likely to be an oxymoron . . . .

  9. Sir Crispin says:

    JB has a good point about PrizeMart. Also, if I can plug a little store and get them some business, all the better to stick it the vested interests in Hong Kong and to help this little store thrive.

    Goodwell, on Hennessy, near the corner of Fleming, has lots of great products at well below cartel prices. Butter is half price for Wellcome and PnS, both of which jacked up (simultaneously) prices of NZ butter by $10 not so long ago. Balsamic vinegar which is priced close to $100 at the usual suspects, is, if I recall correctly, about $25 at Goodwell.

    Support the little guys.

  10. Tiu Fu Fong says:

    On the topic of sub-market prices, I went to a bar on Saturday night and got 4 mixed spirits plus a juice all for HK$135. The bar always has one of its two shutters down and a “private party” sign up all the time, so I assume that its the lack of licensing costs (plus lower rent as it’s not in Central) that keep the alcohol costs reasonable.

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