Yen strength bites 759 Store profits

Feeling the bite from a stronger yen, Hong Kong snack chain 759 Store will shut down at least 15 outlets this year and slash its discounts from next month.

The company has reported its first loss since its 2010 launch, with founder Colis Lam Wai-chun blaming the currency appreciation for raising the cost of its products from Japan, which accounts for about 30 per cent of its range.

There has also been a drop in sponsorship fees from payment-service companies this year, further squeezing profits.
Lam says the change in pricing strategy would result in a 10 to 20 per cent rise in prices for the chain’s members and customers using such payment methods as credit cards and electronic wallets.

He says dealer prices for Japanese products have risen around 7 to 8 per cent, while payment-service partners have cut sponsorship fees paid to the chain by 70 per cent from a year ago.
Instead of discounts of 30 to 40 per cent, members and customers using designated payment methods will find the rebate cut back to 10 to 20 per cent from next month.

However, Lam says ordinary consumers who pay cash or use non-designated methods might enjoy cheaper prices.

He plans to adopt a “fixed price” for each item, with a profit of around 35 per cent on the dealer price. Previously the chain offered three price levels for different products, with profits ranging from 32 to 40 per cent.

However, Lam does not expect to lose customers as he says his products will still be cheaper than those in supermarket chains like ParknShop and Wellcome.