Hong Kong retail sector must innovate to survive
- Return of mainland tourists does not mean business as usual for city retailers, who must think outside the box as circumstances change
Hong Kong’s retail sector is showing green shoots. Empty commercial space has fallen to a three-year low of 9 per cent in the second quarter.
The hardships endured because of the pandemic may hopefully be in the past. But those in the industry shouldn’t expect miracles.
A number of factors work in the industry’s favour. Large banks have been more willing to make loans.
Commercial Data Interchange, a platform launched by the Monetary Authority, has enabled banks to access information and make loan decisions quickly, especially for small and medium -sized enterprises (SMEs).
A multi-year government programme has helped guarantee loans for SMEs. Last year, HSBC, the biggest lender in Hong Kong, launched a HK$40 billion financing scheme for SMEs with cash rebates to encourage them to hire staff.
Despite the positive signs, there won’t be a V-shape recovery for the retail property market. The sector has fundamentally changed since the anti-government riots in 2019 and then the pandemic.
Cross-border buyers of popular items such as luxury goods, electronics and milk powder have dwindled. Since mainland authorities slashed import taxes in 2017, the price gap of those items, especially luxury goods, has closed significantly between mainland China and Hong Kong.
As the yuan has dropped, some luxury items have become cheaper in Shanghai than in Hong Kong. The local dollar and the yuan have reversed previous courses and may be heading for parity.
People can therefore spend on the mainland, rather than the city.
Meanwhile, Hainan has been growing in recent years as a duty-free shopping hub. With increasing flights to the island, visitors are being drawn away from Hong Kong and Macau.
Still, more mainland tourists are coming back. In the first half of this year, 12.9 million visitors arrived here, a massive increase from 76,000 a year earlier, and about 80 per cent of them were from the mainland.
As a result, retail sales rose by 20.7 per cent. However, they remain 15 per cent lower than in the first half of 2019, before the violent protests started.
The industry can’t expect to be back to business as usual, and must innovate to survive.
