Hong Kong retail picks ups after four year slump

After years of slowing sales, Hong Kong’s retail market has started to pick up, signalling good news for occupiers and investors alike.

August 08, 2018

For almost four years, the retail market has seen decreasing sales, primarily owing to a slowdown in the luxury market brought about by a clampdown on gift giving in China and a decrease in the number of mainland Chinese tourists visiting Hong Kong.

But things appear to be changing.

Total retail sales increased by 13.4 percent in the first six months of this year compared to the same period last year while 90 percent of international and local retailers saw their sales increase in the first half of 2018, according to a recent survey by JLL.

An increase in mainland visitor arrivals and local consumer sentiment, boosted by the city’s strong stock and property markets, is behind the rise in sales, says James Assersohn from JLL’s Asia Pacific Retail team.

“International retailers need to have a strong presence here, and with visitor arrivals up, it’s getting easier for brands to convince their head offices to open stores,” he explains. “We’re also seeing more Mainland visitors traveling independently—rather than as part of tour groups—and they are looking for experiences, as well as shopping.”

New opportunities for retailers
While sales are increasing, Hong Kong’s retail scene is changing, forcing landlords to change their strategies for growth.

Traditional drivers – including footfall from the mainland and demand for luxury goods – will continue to play a role, but it’s the mid-priced brands aimed at millennials and Generation Z shoppers that are now shaping the city’s retail landscape.

Although Central, Causeway Bay and Tsim Sha Tsui remain predominantly luxury retail hubs—the hard luxury sector experienced 27.8 percent growth year-on-year in June—the presence of affordable brands in other shopping districts is growing at a swift pace, and they are expected to remain one of the main sources of leasing demand this year and beyond. Cosmetics remain a high-growth sector, while department stores and supermarkets have seen also higher commodity sales in recent months.

The increased spending by local shoppers provides a more sustainable growth trajectory for retail businesses, notes Assersohn, but he warns that bricks-and-mortar retailers should embrace online sales to maximise their impact in the market.

“Consumers are becoming more and more knowledgeable about what they want and are using the internet and social media to check pricing before they shop,” he says. “They are researching brands in great detail to find out where they can buy products at the best price.”

As a result, brands have to be fully transparent about any price differences between online and offline channels, and provide added-value services— like personalized products, mobile payment options and in-store experiences—to remain relevant.

“In this period of surging double digit retail sales, retailers that don’t have their finger on the pulse and that can’t keep up with the trend will not keep customers coming back,” says Assersohn.

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