759 Store is one of the famous supermarkets in Hong Kong. Many people love to buy 759 Store’ products because of the lowest prices. Their marketing strategy is “small profits, quick returns” which mean they sell their products at low price in order to increase the stock turnover rate and earn the profit faster. However, some research shows that the price of the local products in 759 Store are much lower than others competitors and some of other retailer shop owners pointed that 759 Store are underpricing their products intentionally in order to eliminate other competitors.
Since 759 Store’ strategy is “small profits, quick returns”, their products’ price have to be lower than the same products in outside market in order to earn profits form each products. Also, customers never complain on the low price of products and they will appreciate that if the shops can reduce the product price further. 759 Store has provided some discounts on different combination of products in order to attract more customers. This strategy provides a quick return on stocks and rapid cash inflow to 759 Store. Since 759 Store want to extend their market share, they have intention to do the predatory pricing which means to reduce other competitors profits by underpricing, when others competitors can not afford their operating cost and shut down, the price will rise back to original level and the shop can monopolize the whole market. Some research shows that 759 Store’ sales can barely cover the costs of their products which indicate that some of their products’ price are even lower than the cost. They can easily built up the connection of customers and meanwhile they can eliminate the competitors. Many small business or retailers have been closed because they can’t afford their operating cost with declining profits. The owner of 759 Store has decided to expand his business in order to earn larger market share.
Although underpricing will not violate the law, is it ethical to do so?...
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