Topic ： What is the market structure of fruit and vegetable shops in the Chun

Yeung Street market of North Point - Hong Kong?

 CONTENTS
Part A Introduction
Part B Hypothesis
Part C Literature review
Part D Methodology
Part E Primary Research
Part F Customer survey
Part G Conclusion
Part H Issues for consideration
□ Introduction

The Chun Yeung street in North Point is a distinctive traditional

outdoor market since the 19th century. It is located from the east
to Tong Shui Road to the North Point Road and the few streets
nearby (red circle on Map 1).
In this market, there are around 50 shops selling fresh fruits
and vegetables products (Kaibo, Justjoy and Hooping). These
include seasonal fruit, vegetables and meat etc. After making a
roughly observation of the market, most shops sell these
products, and they look identical.
□ Introduction

It is instructive to evaluate real life with economics. Thus, after

learning about the theory of the firm, it makes research
meaningful of fruit and vegetable shops in the chun yeung street
outdoor market. The whole market covers a small area and
shops are very close together. This means that the shops are in
direct competition with each other. However, they seem to all sell
near identical products. This leads to several questions:
□ Introduction

1 How do shops compete?

2 Why do customers choose a particular shop in the market?

3 Do shops make subnormal (Also known as loss. Happens when total

revenue cannot cover total cost.) , normal (Happens when total
revenue equals to total cost.) or abnormal profit (Happens when total
revenue is larger than total cost.)?
□ Introduction

This makes one wonder how all shops might be able to survive and stay
in business, which makes the topic interesting.

These questions lead to a research question to evaluate this topic:

What is the market structure of fruit and vegetable shops in the chun
yeung street outdoor market of North Point? This essay will focus on how
the chun yeung shops operate, interact with the customers and survive.
□ Hypothesis
With the basic observations （ many consumers in the market, market freedom,
commodities are homogeneous ， people prefer to shop from fixed shop ） of the market, the
following hypotheses will be investigated:

1 The chun yeung outdoor market will closely equivalent to a perfectly competitive market structure as
there are 50 shops in this area.

2 Consumers choose the same shop multiple times to repurchase because of customer loyalty and shops’
reputation, but they change their buying choices when other shops sell the same product at a lower price

3 The main form of competition on chun yeung street outdoor market is price competition as products seem
to be identical.
□ Literature review
1 In chun yeung street outdoor market, many firms sell homogeneous
products ， thus you can think of it as a perfectly competitive market.
□ Literature review
2 ， In perfectly competitive markets, because of the large number of
sellers and buyers, no one can manipulate market prices. According to
the supply and demand curve, the demand for goods is inversely
proportional to price. When prices fall, demand increases.

3 ， The firm competes for market share with other competitors through
flexible reactions such as pricing or price changes to get more
customers.
□ Methodology

Both primary and secondary research will be conducted. Below is a list of secondary research
that would help to indentify the market structure of the dried chun yeung outdoor market:

Literature review of market structure(electronic library: ouhk library,CNKI)

Books and publications in the library(electronic library: ouhk library,CNKI)
Articles on internet about fresh food market(electronic library: ouhk library,CNKI)
Interviews with shopkeepers and customers(chun yeung street outdoor market, talk to
people/record price)
□ Methodology
For primary research, a specific area will be selected. On Map 2, red constituencies will be studied.
□ Methodology
Primary research would be partly done through observation. In most shops, a total of about
5 product prices will be recorded in the selected shop, and 10-20 shops in the area will be
selected.

Surveys and interviews will be done. 30 customers will be surveyed and the customers will
be randomly chosen. The aim of the survey is to investigate the customers’ particular
behaviours while purchasing fresh food, as well as their reasons for their preference of
shop.

There will be interviews with at least 3 shop owners. The aim of the interviews is to
determine the degree of price and non-price competition, ease of entry/ exit and the
profitability of the industry.

Secondary research will be used to backup some of the data found during primary
research.
Primary Research
Number and size of firms
Counting the shops in this area, there are 45
fruit and vegetable shops. The number of shops
is large. This shows that the market has the
characteristics of perfect competition or
monopolistic competition

Type of products
tomatoes, grapes, etc

Price of the products

Divide the entire area into 9 areas
Primary Research

Most products are priced

similarly in different shops.

However, the prices of

some commodities vary
greatly in different shops 。
Primary Research
Customer loyalty in the fruit and vegetable market,
which is a feature of monopolistic competition and
oligopoly.

Business district have participated in the price

agreement ， this approach is a feature of collusive
oligopoly

Price competition/non-price competition ， no paid

advertising or promotional activities. rely on non-price
competition ， monopolistic competition and oligopoly.

Reflects long-term abnormal profits, which are

characteristics of oligopoly.
Backup secondary research –
Competition law

“Anti-Monopoly Law”of Hong Kong

This creates legal constraints on the collusion of fruit and vegetable shops, and also
provides protection for new small shops entering the market, which not only optimizes the
market environment, but also provides a basis for the protection of consumer rights.
Interview with a wholesaler

As can be seen from the table1 , the retailer has

increased the price by at least 62%.On average,
retail prices are 83.6% more expensive than
wholesale prices.

Fruits and vegetables is high and they are not

easy to shop, and they are very easy to rot.

It is easy to collude

In the long run, there is a high probability that

abnormal profits will be obtained, which is a
characteristic of oligopoly.
Customer survey
Customer survey

It seems that 87% of customers only shop at 1-3 shops. 67% of customers continue to
revisit the same shop when purchasing fruits and vegetables. This shows a high level of
customer loyalty.

For the three fruit and vegetable products surveyed, if the price is reduced by 10% to 20%,
more than 50% of customers are willing to buy fruits and vegetables from other shops,
which is a large percentage of price changes. This indicates a relatively inelastic XED.

55% and 29% believe that quality and reputation are important, which means that unless the
reputation is good, customers will not shop at random shops where quality is not
guaranteed. This can be seen as a high barrier to market entry and supports oligopoly.

Non-price competition plays an important role in the industry. These elements are the
characteristics of monopolistic competition and oligopoly.
Conclusion

Customer loyalty explains why customer surveys show that customers do not gain a
comprehensive understanding of the market. Hypothesis 1 is almost rejected.

Hypothesis 2 is partially accepted.

Shops rely mainly on quality and reputation to win customer loyalty/ the price collusion.
Hypothesis 3 is rejected.

On the spectrum, the market will be placed in the following positions:

Issues for consideration

1.Will the fruit and vegetable market structure be more oligopolistic?

2.How can companies attract young customers to survive?

3. Cost of the company may increase. How can the company seek profits?

4. How can the physical fruit and vegetable market conduct business online?

5. Affected by COVID-19, will that affect people's shopping tendency?

Limitation of the investigation

Limited number of interviewees

Privacy restrictions

Sample limit
□ Thank you ！