Hong Kong retail: the tourist factor
The dramatic influence on Hong Kong retail over the last decade has been tourism.
And it is tourism that will change the industry in the next few years to come, as mid-market retail brands overtake luxury brands as the main driver of retail demand in the territory.
According to the report, The Changing Retail Landscape: How to Survive the Slowdown in Hong Kong?, from 2004 to 2015, the percentage of retail sales contributed by tourists more than doubled, from 20 per cent to 42 per cent.
“This accounted for the tremendous sales growth in tourist-oriented products, including cosmetics, jewellery and watches as well as electronic goods,” explains CBRE in an overview of the report.
“The number of cosmetics, leather goods and jewellery and watch shops grew by 1975 per cent, 62 per cent and 29 per cent respectively from 2003 to 2014. Some of these retailers have not only grown in number of shops but also the average size of their retail premises.”
Since 2014, Hong Kong has seen a decline in tourist arrivals from the mainland, and changes in tourist spending patterns from luxury to mid-range goods.
Local retail spending is robust but is often neglected. Local real private consumption expenditure registered an average annual growth of 4.9 per cent between 2004 and 2014, and the median household income rose by four per cent per annum during this period.
“Domestic consumption is set to remain healthy in the short to medium term, although short-term stock market volatility and an anticipated interest rate hike may marginally scale back household consumption,” CBRE concluded.