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E-commerce in Hong Kong: Ready for Take-Off

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Daegal Leung Bio

Hong Kong is one of the most digitally equipped cities, with a staggering 232% penetration rate of smartphones and 176% for internet subscriptions in 2017. With the growing influence of e-commerce in the rest of the world, one has to wonder why Hong Kong, by all means, a technologically advanced city, falls well behind in such development. Some say Hong Kong consumers are much more reluctant to try new technologies, but can this be solved by solely demand push solutions? Multiple factors have hindered the development of e-commerce in Hong Kong, coming from both demand and supply sides.

Lack of online platforms

When shopping online, Hong Kong consumers prefer to make purchases on online platforms rather than shop specific apps as these platforms are designed to provide a frictionless shopping experience. In Hong Kong, apart from HKTV Mall (the largest online shopping platform), there are a limited amount of other online platforms. The absence of large online retail platforms makes it difficult for consumers to compare products over multiple sellers. Compared to Amazon, eBay and Walmart in the US, or JD, Tmall and Taobao in China, there are plenty of untapped opportunities in Hong Kong.

Consumers do not see the added-value in e-commerce

There are just under 350 department stores in Hong Kong, which means there is a department store every three square kilometres, and the number has yet to include other retailers and convenience stores. Therefore, given that it is incredibly convenient to shop in Hong Kong, most consumers would, for example, pick up groceries daily on their way to and from work.

Grocery online shopping in Hong Kong is not frictionless

The following table shows the comparison between the two main supermarkets in Hong Kong with an online platform (ParknShop and Wellcome), and leading supermarkets from Singapore (Redmart) and the UK (Morrisons).

Grocery retailers Minimum Free Delivery Same Day Delivery Hours of Delivery Fresh Meat Dairy Fruit and Veg Frozen Food
Parknshop (HK) HKD500 Morning orders only 1100 – 2230
Wellcome (HK) HKD500 Not available 0900 – 2200
HKD400 (GBP40) Available for some products, or next day pick up. 0600 – 2330
Redmart (Singapore) HKD240
Available for some products 0700 – 2200

From the above comparison, it is clear that Hong Kong players have a smaller delivery window and in general take longer to deliver. Supermarkets in the UK and Singapore (taken as examples) provide same-day delivery for some products, while Hong Kong players do not offer such service. Furthermore, Hong Kong supermarkets’ online platforms offer a narrower range of products.

Hong Kong grocery shoppers tend to split their shopping across different shops: they would buy meat and vegetables from their local retailers, seafood from the wet market, and everything else from the supermarket. It is a common belief that in this way, they can ensure that the quality of the products is up to their standard. Meat is usually a key and expensive component of a grocery basket in Hong Kong. If shopping online is supposed to be an alternative to this shopping habit, being unable to offer fresh meat is a big hindrance to shifting groceries online. In addition, the lack of such an expensive item makes it even more difficult to meet the minimum order to be eligible for free delivery; potentially one of the reasons why most Hong Kong shoppers are not too keen on shopping for groceries online.

Ironically, the majority of shoppers choose to have their orders delivered to one of the retailers’ pick-up spots instead of to their home. The main reason is that the available time slots for delivery are often inconvenient for consumers who work full time. In addition, retailers do not offer concrete delivery time slots, rather, they would deliver the product any time during working hours. Hong Kong consumers like to have the freedom to pick up their goods anytime instead of having to be at home to wait for the delivery to arrive.

Compared to the e-commerce scene in China, a stark contrast can be seen: lower minimum spend for free delivery; 2-hour delivery slots, and a wide array of products available online. In mainland China, one can see how mobile payments for street hawkers and taxi drivers has become the norm, while Taobao (an online commercial platform) has become a verb. Chinese consumers expect an omnichannel shopping experience, and the public is eagerly looking forward to the next technological advancement from e-commerce vendors. The success of e-commerce in mainland China is facilitated by the combination of both supply and demand factors.

From the above analysis of the Hong Kong e-commerce scene, supply-side factors certainly hinder consumers from shopping online. However, Hong Kong is moving in the right direction in pursuit of a more developed e-commerce environment; industry sources suggested almost a third of CEOs say they plan to increase their investments in their e-commerce and online sales operations in the short term. As Hong Kong millennials warm up to the idea of shopping online, major retailers, as well as smaller vendors, are getting more aggressive with their e-commerce strategies.

All in all, with Hong Kong e-commerce in its infancy, there is certainly potential for e-commerce to take off in the near future. It is simply riskier for businesses to avoid developing a digital strategy than to put resources into it.

Sources: ParknShop, Wellcome, Morrisons, Redmart

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