Last week, the closure of DSC astonished many people. For those unfamiliar with DSC, it was a chain store group which specialized in direct selling of electrical appliances and home furniture. The company was successful as its business model allowed customers to shop for products at very reasonable prices. In addition, because of the direct selling approach, DSC did not have to carry a lot of inventory. This also lowered DSC's inventory costs. As a result, DSC grew rapidly over the past decade. So the sudden closure of the chain was unexpected. Many customers had paid deposits for products they had ordered. They are unlikely to recover these.

The victims in the DSC saga include the suppliers to the company, customers who cannot recover their deposits and the employees whose salaries have not been paid. In Hong Kong, businesses operate under the rules of free market capitalism. As a result, new companies emerge and close down. Some will grow and become giants, while the majority will not survive in a competitive market. As long as these ventures operate according to the rules, nothing is wrong. In the case of DSC, there is a possibility that some misdeeds were committed. For example, there are reports saying that the owners of DSC disappeared shortly before the closure of the company. Also, the company still very recently ordered goods from a supplier. To many people, the technical details of the case are incomprehensible. But the public is more concerned whether the employees of DSC are now receiving adequate assistance.

Officials from the Labour Department have worked hard on this case. They speeded up the process to help the employees seek help. Also, department officials have performed many extra tasks to facilitate the claims of legal and rightful damages from various sources. In the current political climate, it is easy to criticize the government for not doing enough. However, the Labour Department has worked beyond expectations. This shows its high level of professionalism.

The DSC saga also demonstrates that the retail industry is now facing very difficult times. Retail sales figures in recent months have shown a downward trend. When one walks along streets in Causeway Bay or Mong Kok, it is not uncommon to see vacant shops. The most important cost element in the retail business is rental. Even though there are signs of falls in general shop rental charges, they are still high. This and other difficult aspects of retailing, like long working hours and low profit margins, show that the future of the business does not look too promising.

The Legislative Council elections will be held next year. The DSC saga will lead to more calls for greater protection of workers. Employers should be prepared for greater calls for labor protection. This will in turn increase operating costs. I am not saying that the competitiveness of Hong Kong's businesses rests on the exploitation of employees. But any new regulations will increase the costs of doing business. This is the likely trend and employers should be prepared for this. Political candidates will also exploit the labor issue as a way to get votes.

The closure of DSC is only one incident showing the difficulties facing the retail market. Some believe more cases like this will occur in the next few months. For the Labour Department, it will mean more work and pressure in handling labor problems. One thing is certain: Tough times for the retail industry are far from over. More difficult challenges lie ahead.

(HK Edition 08/13/2015 page10)