Retailing remains positive though slows down from 2012
Retailing saw slower current value growth in 2013 than 2012 although remaining satisfactory. The influx of Mainland Chinese tourists continued to be the key contributor to Hong Kong’s retailing scene, with several retailers reporting that more than half of their turnover was attributed to Mainland Chinese tourists. However, weak economic conditions in China saw the Mainland Chinese tourists also more cautious of their spending, which affected the performance of retailing in 2013. Increases in prices for Mainland Chinese’ shopping tours to Hong Kong during the second half of 2013 also limited the growth potential of retailing in Hong Kong.
High rental costs affects retailers’ expansion plans
Rental costs in Hong Kong continued to spiral upwards in 2013, with players able to afford the rents quickly displacing those that could not or were unwilling to. H&M was one key apparel specialist retailer affected by this, as it closed its flagship store at Central after being open for five years. The location will be taken over by Zara, which has been expanding aggressively in the region. Many other retailers, such as Chow Sang Sang, were also more cautious in their retail expansion during 2013, as they were keen on strategic locations rather than expanding exponentially. Players such as Sa Sa also seek to expand out of key shopping or tourist areas, which command a lower rental, yet being able to more adequately meet local consumers’ needs.
Non-grocery retailing edges upwards in 2013
Non-grocery retailing gained value share during 2013, as it continued to benefit from purchases made by Mainland Chinese tourists. High import taxes in China represented the key driver for Mainland Chinese tourists to do their shopping in Hong Kong, especially for luxury goods, where they can enjoy lower prices and a comprehensive product range. Local consumers’ rising sophistication also saw them more willing to invest in premium non-grocery products that can enhance their lifestyle. On the other hand, grocery retailing was increasingly competitive as players engaged in regular promotions to attract consumers.
Intensifying competition in retailing
More international brands entered Hong Kong at the end of the review period, while some brands expanded their retail network in order to better capitalise on the opportunities offered by Mainland Chinese tourists. The proliferation of Internet retailing, with consumers seeking to purchase brands not available in Hong Kong, also created additional competition for retailing in 2013. With this, existing brands faced a greater challenge in terms of sustaining their value share in 2013. Players were eager to review and improve their product portfolios to ensure that they were aligned with consumers’ evolving needs. They were also seeking new channels of growth, for instance engaging in Internet retailing or exploring new retail concepts that could create new consumer interest.
Retailing expects positive performance
Over the forecast period, retailing is projected to see a positive constant value performance. With an expected rebound in economic conditions over the short-term forecast period, this will benefit demand from both local consumers and Mainland Chinese tourists. The latter’s high purchasing power and their willingness to shop in Hong Kong to tap into the cheaper prices than those available in China will remain a key opportunity for retailing in Hong Kong in coming years. Therefore, more international brands are likely to enter Hong Kong to take advantage of this opportunity, using Hong Kong as a showcase for their brands. Meanwhile, Internet retailing will continue to increase in prominence alongside consumers’ growing sophistication. These factors will increase competition for retailing over the forecast period, with existing retailers increasingly challenged to seek new growth channels to sustain value share.
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The Retailing in Hong Kong, China market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic number of stores, selling space and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- How big is the grocery/non-grocery/non-store channel in Hong Kong, China?
- Who are the leading retailers in Hong Kong, China?
- How is retailing performing in Hong Kong, China?
- What is the retailing environment like in Hong Kong, China?
- Which channels are winning or losing in the fight for consumers’ money?
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This industry report originates from Passport, our Retailing market research database.