Hong Kong snack chain 759 to close stores, cut discounts as it faces stronger Japanese yen and reduced sponsorship

759 Store also plans to close at least 15 shops this year after giving the big supermarket chains a run for their money

PUBLISHED : Thursday, 28 April, 2016, 12:01am
UPDATED : Thursday, 28 April, 2016, 9:01am

Popular Hong Kong snack chain 759 Store plans to slash its special discounts from next month and shut down at least 15 stores this year, the first net decline since the brand was founded in 2010.

Chain founder Colis Lam Wai-chun said they could not afford to provide deep discounts as the recent appreciation of the Japanese yen had raised the purchasing cost of its Japanese products, while a huge drop in sponsorship fees from payment service companies this year was also squeezing profits.

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The snack chain, which sources roughly 30 per cent of its products from Japan, is famous for offering below-market prices to customers, a strategy that won it market share from big supermarket chains over the years.

But the change of pricing strategy would result in a 10 to 20 per cent rise in prices for the chain’s members and customers using designated payment methods like MasterCard and electronic wallets, Lam said.

“We simply could not afford it any more,” said Lam, adding that operational costs had gone up significantly this year.

Lam said dealer prices for Japanese products rose around 7 to 8 per cent recently on the appreciation of the yen, while its payment service partners were not as generous as they used to be this year, cutting the sponsorship fees they paid to the chain by 70 per cent compared with a year ago.

From next month, customers who use designated payment methods or members will enjoy a discount of around 10 to 20 per cent for their purchases, smaller than the previous 30 to 40 per cent discount.

However, Lam said not all customers would have to pay higher prices. Instead, ordinary consumers who choose to pay cash or through non-designated methods might enjoy cheaper prices.

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Lam said at least 40 per cent of its goods would have their prices cut in May. The snack chain will adopt only one “fixed price” for each item, with a profit of around 35 per cent on the dealer price. Previously it offered three types of prices for different products with profits ranging from 32 per cent to 40 per cent.

“Some customers only buy when we offer discounts of as much as 40 per cent,” said Lam, adding the new pricing method could solve his problem.

However, Lam did not expect the move to result in a customer exodus, as he claimed products in his stores would still be cheaper than those in big supermarket chains like Wellcome and ParknShop.

Most 759 store customers polled by the Post on Wednesday said they were not aware of the coming price changes, though many said the variety of goods on offer, rather than price, really mattered to them.

“I like the variety and the overall price is reasonable. The milk tastes really good,” said Brankie Wong, an office worker in a Wan Chai store, adding that she visited the store once a week.

When asked if the change in pricing policy would affect her shopping habits, Wong said she would have to look at the prices first.

“I visit 759 around once a week to buy biscuits,” said Trudy Tong, a housewife, adding she spent around HK$100 each time. “The kids like them. There is a lot of variety.”

Tong said she would also wait and see the price changes before deciding what to do.