After several years of turbulence with the pandemic, challenges are finally over. With quarantine-free travel back, opportunities and challenges come at a time to Hong Kong’s retail market.
Our recently launched Viewpoint has examined the current retail market and outlined recommendations to consider for 2023 and beyond. Here are a few things that both landlords and retailers should be aware of:
Post-pandemic era: In-store shopping remains important
e-commerce has revolutionised the retail market thanks to the pandemic over the past few years. Yet, our recent survey unveiled that Hong Kong consumers prefer shopping in physical stores to try and get goods immediately. They would also enjoy instant advice on product information and face-to-face interaction from salespersons.
Omnichannel shopping is common across different generations in Hong Kong. Obviously, both online and offline shopping are essential for retailers to engage their target customers.
Tourist-oriented trades will be benefited
Following the full border reopening in early February, tourist volume has soared to almost half of the pre-pandemic level just within a few weeks. While domestic consumption momentum is basically restored and back to pre-pandemic levels, tourist consumption will see a strong rebound in the rest of the year. As such, tourist-oriented trades such as pharmacy, beauty, cosmetics, and local/casual fashion will be benefited. Healthy labour market conditions will warrant sustainable local spendings in F&B and general consumer goods.
The process of returning to normalcy is going to be a thorough recovery, benefiting both luxury, selective mass-to-mid-tier and F&B trades.
Border reopening: Mainland tourists will be dominating the retail market
Mainland tourists, be it before and after the pandemic, are the primary support of Hong Kong tourism. Hong Kong still remains the most favourite destination for them according to a few recent market surveys.
It’s interesting to note that the spending pattern of Chinese tourists has changed – demand has shifted from luxury to mid-range items, particularly healthcare and beauty products, fast fashion and sportswear. They also enjoy dining experiences in Hong Kong. To cater to the growing needs, there are demands for shops in both prominent retail hot spots and second-tier high streets.
Growing competition from emerging markets
While the outlook is great, Hong Kong is facing growing competition from some emerging tourism markets. It has been decades that Hong Kong is seen as a ‘shopping haven’, recent years saw some neighbouring markets catching the eyes of tourists with duty-free advantages and a wider presence of retail brands.
Take Hainan as an example – Hainan is a pilot free trade zone, the largest special economic zone in China. With the duty-free allowance policy, products in Hainan are generally competitive in pricing, attracting tourists to Hainan for shopping.
What’s more, international luxury brands have been very engaging in opening physical stores across leading and emerging cities in mainland China to directly connect with the country’s large population in recent years.
Other challenges include the city’s shortage in labour supply and limitations on some hardware provisions.
Despite the above, tourists continue to recognize Hong Kong offers a superior shopping experience.
What’s next?
The retail market has already bottomed out and is on a steady recovery despite growing competition from other markets. To ensure Hong Kong is back in full swing, top events are fully loaded in the pipeline to drive MICE (Meetings, Incentives, Conferences and Exhibitions) tourism. While mainland Chinese tourists are important shoppers, international and business travellers are also the traditionally big spenders on F&Bs. Demand for cozy restaurants in leading commercial hubs will likely see a big boom.
Now is the best time for retailers and restaurant operators to recalibrate their footprints in Hong Kong.
Don’t miss the essential insights on the future of the retail market. Check out the latest report Hong Kong Viewpoint - Hong Kong Retail Recovery: Opportunities and Challenges.
