Reports of a price war between two bean curd pudding shops in Hong Kong’s Tsuen Wan district have gone viral.
The two shops are offering a bowl of bean curd pudding at HK$2 and HK$3 respectively, while pledging to maintain uniformly high product quality.
A veteran in the business has pointed out that the cost of plastic bowl, lead and spoon itself amounts to HK$2 per set. Adding other expenses such as the costs of ingredients, labor and rentals, this kind of price war is suicidal.
But if the two are deliberately engaged in the price war in order to create a so-called positive externality effect, meaning that the publicity the price battle gets can help spread the name of the shop and attract more customers over the long run, this kind of short-term promotion might make sense.
No matter what, it’s definitely a good thing for the local business community.
In fact, the two were engaged in a similar price war in 2014. And I had noticed that several other snack shops had opened on the same street after that, as they sought to feast on the growing traffic. This turned the street into one of the hottest places for foodies in Tsuen Wan.
Property owners are probably going to gain most, both in terms of rental gain potential and higher valuation of properties.
The full article appeared in the Hong Kong Economic Journal on Nov. 13
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]