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Freebies used to lure Hong Kong customers

AFP, HONG KONG
Monday, Nov 12, 2001, Page 19

As Hong Kong's economy teeters on the the brink of recession, retailers are resorting to doling out freebies in a bid for consumers' wallets in an increasingly cut-throat environment.

Desperate times warrant desperate measures and as margins from rapidly shrinking profits tighten, retailers have reached deep into the goodies bag to reinvigorate the spirit of spending in what used to be acclaimed as Asia's premier shopping haven.

Lucky consumers can now wash down their HK$18 (US$2.31) lunch boxes with a free bottle of mineral water or a soya bean drink.

Restaurants are handing out scrumptious free dishes for selected purchases while some eateries are offering popular local white steamed chicken for the bargain basement price of a dollar.

One butcher offers free bags of rice with every HK$30 purchase of pork. The freebie has reportedly led to a reversal of fortunes as soaring sales rescued his business from the brink of bankruptcy.

He was cited by the Sun daily as saying October was the best trading month in the past half year with turnover rising 20 percent.

Other fresh food vendors have quickly followed suit with some offering free minced fish with every HK$30 worth of fish, while fruit and vegetable vendors are throwing leeks, peppers or free bananas at their customers as a reward for their custom.

"A freebie is now the order of the day otherwise you won't get a single customer," moaned newspaper vendor Cheung Tai, as she gave a complimentary packet of tissues with every newspaper.

"Business is getting difficult," she said, adding other newspaper vendors were handing out two packets of tissues as the battle to win customers heated up.

The territory's two leading supermarket chains are engaged in a price war, while others are doling out stamps which can be exchanged for free gifts.

Middle-to-high-end fashion retailers are offering discount coupons, or free bags or accessories, in addition to half price promotional sales.

"These are all promotional tactics to stimulate consumers to spend," said Anita Bagaman, executive director of Hong Kong Retail Management Association.

"Definitely, you will be seeing a lot of it as retailers take aggressive promotional methods," Bagaman said.

"The retail business has been pretty bad, particularly after the Sept. 11 terrorist attacks, which obviously had an impact on consumers' confidence," she said.

As the global economy deteriorates further, the clouds over Hong Kong would continue to loom large, economists warned.

They said expectations of higher unemployment, job insecurity and deflation would undercut consumer confidence while the availability of cheaper goods just across the border in the town of Shenzhen will continue to be a drain on the local retail industry.

For September, retail sales fell 4.4 percent year-on-year to HK$14.4 billion and were down 1.7 percent in volume, while in August, retail sales were down 0.9 percent but rose 1.8 percent by volume.

Hong Kong's economy grew just 0.5 percent in the second quarter year-on-year and is widely expected to contract 0.3 percent this year as demand from the US, its second-largest trade partner, waned since the Sept. 11 terrorist attacks.

Unemployment is at a 17-month-high of 5.3 percent and is expected to reach more than 5.5 percent by year end.

BNP Paribas Peregrine Securities economist Raphael Wu said in a research report that domestic spending would slacken further as unemployment rises and companies cut salaries to reduce operating costs.

"The grim income prospects and the uncertain labor outlook will therefore delay any hope of a recovery in retail activity, with cautious consumer expectations diminishing the propensity to spend in the final quarter of the year."

Wu said consumer expectations had been worsening even before the Sept 11 terrorist strikes but the attacks had accelerated the deterioration.
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