Starting off in 2010 as a retailer of Japanese snack foods, Hong Kong’s 759 Store chain now sells a wide range of grocery and other items ranging from cart noodles to personal care products.
Founder Lam Wai-chun appears to have an insatiable appetite to expand his retail kingdom. Not resting on his laurels, he has now outlined plans to open 5 convenience stores next month.
Lam, whose holding company is CEC International (00759.HK), told the Hong Kong Economic Journal that his group plans to take on the giant in the convenience store business — 7-Eleven.
The 759 Convenience Stores will take a leaf from the Japanese convenience store model by providing cooked food such as lunchboxes and sandwiches.
While the 759 Store cousins mainly sell Japanese and Korean snacks, half the food items offered by the upcoming convenience stores will be supplied by Hong Kong brands.
Customers will be able to buy traditional snacks such as Wah Yuen Food’s dried pork floss and dried sweet plum in the stores.
Lam revealed that the pricing strategy of his convenience stores will be in line with those of the rivals, but members will enjoy discounts and rebates when they shop at other group outlets.
Unlike other convenience stores, no cigarettes will be sold in the 759 Convenience Stores.
While the plans sound interesting, some observers are questioning if the retail group is getting involved in too many different business lines.
Lam told Apple Daily that everything is part of his grand retailing plan, as different operations such as cart noodles and bakeries have helped him figure out the best format for the convenience stores.
Now, does Hong Kong have room for one more major player?
The market does look a bit saturated if we look at the financial results of Convenience Retail Asia (00831.HK), which operates the OK convenience store chain. The company’s core operating profit dropped 2.1 percent during the first six months last year.
OK does not have a clear positioning, according to Lam. On top of that, all of its outlets are located in the prime spots of the city, meaning the group has to shoulder high rental costs.
Besides convenience stores, Lam is also preparing to launch ’12 dollars stores’. The 759 online store will also make a comeback after screeching to a halt last year.
Lam plans to sell mainly Japanese and Korean facial masks through the 759 online platform. The profit margin in facial masks is low, while the goods use up lot of space in physical outlets. Thus, the group is changing its strategy and switching to e-commerce to sell those products.
759′s retail network can now be seen all over the city and it is still expanding. When asked how many convenience stores he wants to open, Lam said: “As many as possible”.
Critics are wondering if Lam is biting off more than he can chew.
So Pui-fung, a strategist at CMB International, remarked that CEC International couldn’t wait to expand into the food and catering sector as soon as its snack retail business became profitable.
Some investors may surely feel that Lam is being too aggressive. However, one should note that CEC’s share price has jumped more than 13 percent since the convenience store plan was announced on Tuesday.
The market is cheering Lam’s expansion plans, at least for now.
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