Monday, April 09, 2007

And What's Wrong with That? or I Could Have Filed it Under the Why HK does not Have Better Reporters Category

SCMP has a story last Sunday on competition between convenient stores, supermarket chains, and mom-and-pop stores.

This is the beginning of the story:

"Stacking cans of Coca-Cola Zero in his Tsuen Wan grocery shop, Lai Wai-kwong has been wondering whether the new cold drink will boost sales at his small business.

Things do not look promising. He sells three cans for HK$10, or HK$3.33 per can, which yields a 10 per cent profit margin. But supermarkets are selling eight cans for HK$20.90, or HK$2.61 per can. What's more, shoppers receive a free bottle of lemon tea with their buy."

Please tell me reporter, what's wrong with customers getting the better end of the deal? Would you prefer to see these giant supermarkets leave the scene and see the price for Coke Zero to cost HK $ 5.00 a can. Is that fair? And to whom? Sure it is fair to Lai, the owner of the mom-and-pop store, but have you considered the benefits of the customers whose welfare would definitely decline if that were to happen when you penned that article of yours?

Unfair practices are involved the reporter might respond, whose story continued:

"Supermarket chains have more bargaining power with suppliers than mom-and-pop shops like Mr Lai's. Small shops pay 10 to 20 per cent more for soft drinks from wholesalers than the chains. The chains also enjoy exclusive distribution of some products, which Mr Lai is barred from selling."

Read more here.

I would leave the counter-argument in support of the supermarket chains' bargainning power as an exercise to the reader (hint: if not for that power vis-a-vis the suppliers, do you think you could get such a cheap price for Coke Zero at HK $ 2.61 per can mentioned above?). I would pose the answer later on.

As far as exclusive distribution is concerned, do you think at least the reporter should make a case for why such practices might make business sense and how that practice might actually help customers in the first place? Instead the tone of the story makes it seems like the reporter has made a guilty verdict without a trial.

Why couldn't we have better reporters? Again one explanation is that there exists liberal bias in the media, as my fellow classmate back in graduate school reported here.

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