2. Why didn’t supermarkets sell live fish and raw meat several years ago. However, fish and meat are sold in superstores now. Why??? by Cheung Tsz Ho, Tony 23 Nov, 2006

3. Outline Benefits from economies of scale (mass sales) Benefits from economies of scale (mass sales) Lifestyle of Hong Kong people Lifestyle of Hong Kong people Providing convenience and cleaner environment Providing convenience and cleaner environment

4. Economies of scale What is meant by economies of scale? What is meant by economies of scale? A production process is said to have economies of scale, if all inputs doubles, outputs increase by more than 100% A production process is said to have economies of scale, if all inputs doubles, outputs increase by more than 100% This concept can only be applied in the long run This concept can only be applied in the long run

5. How can economies of scale be applied to supermarkets? There are 50 ParknShop superstores and 16 Wellcome superstores in Hong Kong which sell raw meat and live fish There are 50 ParknShop superstores and 16 Wellcome superstores in Hong Kong which sell raw meat and live fish These superstores buy their stocks in bulk These superstores buy their stocks in bulk According to the statistics of National Sun Yat-sen University, their inventory cost is 5 to 10% lower than that of wet markets, say $15 for superstore ’ s and $16.125 for wet market ’ s According to the statistics of National Sun Yat-sen University, their inventory cost is 5 to 10% lower than that of wet markets, say $15 for superstore ’ s and $16.125 for wet market ’ s

6. How can economies of scale be applied to supermarkets? The retail price of raw meat in wet market is $22 per 500g and that of superstores is $24 per 500g The retail price of raw meat in wet market is $22 per 500g and that of superstores is $24 per 500g So, raw meat of superstores is 9% more expensive than that of wet market So, raw meat of superstores is 9% more expensive than that of wet market The profit margin is about 23.6% more than that of wet markets The profit margin is about 23.6% more than that of wet markets Profit margin for wet market=(22- 16.125)/16.125=36.4%; superstore=(24-15)/15=60% Profit margin for wet market=(22- 16.125)/16.125=36.4%; superstore=(24-15)/15=60%

7. How can economies of scale be applied to supermarkets? It is profitable for the supermarkets to sell raw meat and live fish It is profitable for the supermarkets to sell raw meat and live fish They can also cut prices against their competitors in price wars since they have the market power to do so They can also cut prices against their competitors in price wars since they have the market power to do so

8. Lifestyle of Hong Kong people Do you know when Hong Kong people have time to buy foodstuff generally? Do you know when Hong Kong people have time to buy foodstuff generally? Usually after their work Usually after their work Maybe after 7 pm Maybe after 7 pm At 7 pm, most stores in wet markets are closed At 7 pm, most stores in wet markets are closed This provides a strong demand for the sale of raw meat and live fish in the evening This provides a strong demand for the sale of raw meat and live fish in the evening

9. Providing convenience and cleaner environment Supermarkets are usually located at large shopping centres or near housing estates Supermarkets are usually located at large shopping centres or near housing estates This provides much convenience This provides much convenience Also, selling live fish and raw meat means that customers can buy stuff that could only be bought in wet markets Also, selling live fish and raw meat means that customers can buy stuff that could only be bought in wet markets Can save time for going to markets Can save time for going to markets

10. Providing convenience and cleaner environment Moreover, supermarkets provide a hygienic environment and guarantees the freshness of their food Moreover, supermarkets provide a hygienic environment and guarantees the freshness of their food This is very appealing to customers This is very appealing to customers

11. Conclusion Providing foodstuff that are formerly sold by wet markets is a new marketing strategy for supermarkets Providing foodstuff that are formerly sold by wet markets is a new marketing strategy for supermarkets If markets don ’ t improve the shopping environment and lengthen their opening hours, it is very likely that wet markets will fail to exist If markets don ’ t improve the shopping environment and lengthen their opening hours, it is very likely that wet markets will fail to exist

12. END Thank you!!!