Small shops at risk due to the Link's deals with big chains, says watchdog

Consumer Council notes Link's role in plight of small operators and rise of supermarket chains

PUBLISHED : Friday, 20 December, 2013, 4:29am
UPDATED : Friday, 20 December, 2013, 4:29am

In a city where land is so scarce, the Link Reit's rental deals favour supermarket chains at the expense of independent competitors, the Consumer Council has warned.

ParknShop and Wellcome have a combined market share exceeding 60 per cent of the food retail sector, the watchdog estimated in a report released yesterday. In many districts, there is more than one supermarket chain store within a walking distance of 15 minutes.

By contrast, Census and Statistics Department figures suggest the number of small supermarket operators with only one outlet plunged by 16 per cent to 69 between 1996 and 2011. Those outlets also took up very little retail space - less than 1 per cent of the total sector.

Supermarkets enjoy a substantial price advantage over small operators as they can bundle rental deals with the Link, which has a portfolio of 11 million square feet of retail space. This is a factor in their current prominence, the report said.

Chan Po-ying of Link Watch said the real estate investment trust sacrifices small shops for big chains. This year, the Link evicted 50 tenants from a wet market in Yau Ma Tei to make room for a supermarket.

"The proportion of the Link's mall space occupied by chains - including retail and catering - has risen from half to 70 per cent over the past five years," she said.

Small shops face 20 per cent rent rises when renewing their three-year contracts, she added.

Supermarket chain Carrefour arrived in Hong Kong in 1996, but left by 2000 due to a lack of floor space. With no threat of new competitors entering the market, there is less pressure on existing retailers to maintain competitive prices and product choices, the council warned.

Food suppliers also suffer from harsher terms, such as having to pay heavy slotting fees for the placing of their products on shelves of supermarkets.

Instead of covering them using the local competition law, introducing a voluntary code under the Hong Kong Retail Management Association would be a better means to solve those disputes, the council recommended.

In response to the report, a Link spokesman said the Wellcome and ParknShop outlets within Link's malls represent only a fifth of the two chains' shops. The trust "welcomes" small and medium-sized operators, the spokesman said.