Department Stores in Hong Kong, China

2021 DEVELOPMENTS

Domestic consumption supports the sales of department stores

Prior to the outbreak of COVID-19, mainland Chinese tourists represented a significant proportion of consumption in department stores in Hong Kong, with Sogo and Lane Crawford being two of the brands that benefited the most from sales to tourists. From 2020, the absence of mainland Chinese tourists due to COVID-19 resulted in a drastic decline in sales in department stores.

Seasonal sales lose popularity along with the absence of tourist spending

Prior to the outbreak of the COVID-19 pandemic, Hong Kong department stores’ seasonal sales were famous amongst both mainland Chinese tourists and domestic consumers, because of the deep discounts offered during sales events. Amongst these, Sogo’s Thankful Week was one of the most iconic events, which happened four times a year.

Department stores strengthen digital capabilities during the COVID-19 pandemic

Players in department stores decided to expand their e-commerce capability to transform from a traditional bricks-and-mortar model to an online plus offline model, aimed at capturing the growing online purchases by consumers in Hong Kong in 2021. This was driven by the lockdown and social distancing measures imposed by the Hong Kong government.

PROSPECTS AND OPPORTUNITIES

Threat from e-commerce players and shopping centres remains before the border reopens

A one-stop premium shopping experience is what differentiates department stores from other retailers. However, with the absence of mainland Chinese tourists, the ever-growing adoption of online shopping habits by domestic consumers, and the continuous exclusive promotions offered by shopping centres such as Harbour City and Time Square, which reduced the attractiveness of seasonal sales events and the motivation for domestic consumers to visit department stores, this negatively affected sales in 2021.

Customer loyalty key for future sustainable growth

Customer membership and rewards were key to retail strategies in 2021, and are expected to play an even stronger role in the future growth of department stores. In response to the rapid growth of e-commerce in Hong Kong, many retailers, including department stores, developed their online shops, as well as their customer membership and rewards programme applications on mobile devices.

AEON Group rides the “Direct from Japan” trend and speeds up its expansion plan

Whilst department stores underperformed after the COVID-19 outbreak in 2020, AEON, the Japanese department stores player which position itself as a lifestyle department store, surfed against the tide and decided to expand to Kai Tak, the newly developed residential area adjacent to the coastline of Kowloon, in November 2021. Earlier, in August 2021, AEON also expanded its outlet in Mong Kong, one of the well-known tourist spots and mixed function areas of Kowloon.