Hong Kong Retail Slumps 42% For The 14th Month, Yet Retailers Prevail And Open New Stores In The City

For the 14th consecutive month, Hong Kong retail sales fell by 42% in March on a year-on-year basis. Total sales dropped to HK$23 billion and in volume declined by 43.8%. This follows the historic plunge seen in February earlier this year with a 44% sales decline as an effect from the pandemic outbreak – a much more detrimental impact than all the anti-government protests combined during the second half of last year. The first quarter of the year was hit with a 35% decline in total retail sales compared with the same period in 2019, marking it the largest decline on record.

The city had never faced a lockdown, and neither were there any forced social distancing rules set in place. However, the government temporarily suspended several facilities including bars, gyms, beauty parlours and cinemas to suppress any further outbreaks. At the time of writing, Hong Kong has not had any locally transmitted cases for over two weeks and only 4 fatal cases, thus prompting the government to lift all business restrictions and put schools back in motion. The downfall of sales, however, has been mainly attributed by the halt in tourism as part of the government’s ban resulting in a 98.5% and 99.3% decline in international tourist arrivals and mainland visitors respectively compared to the same period last year.

Sales of high-ticket categories including jewelry, watches as well as medicines and cosmetics – all of which have a high dependency on mainland buyers –  fell by 75.2% and 63.8% respectively year-on-year in March. In addition to lower patronage by local citizens due to Coronavirus fears, the Hong Kong Retail Management Association (HKRMA) has predicted some 20,400 stores will close by year-end, including the 5,200 stores that had already shuttered this year. Some key brands that had left the market include fast-fashion house Esprit, Gordan Ramsay restaurants and South Korean fashion chain A-land to name a few. On top of several property developers easing rent, the government has also offered a relief package of more than HK$100 billion to save businesses and workers’ salaries. Yet, one in four retail stores is set to close this year with a further 6,600 stores predicted to shutter between May and August.

The Show Must Go On

Despite the reported figures, several retailers have gone ahead and opened new stores making their debut entrance into the market and, for some, expanding their footprint further with new flagships. Luxury retailers Loro Piana, part of LVMH group, opened the world’s first footwear store concept while watchmaker Panerai opened a watch accessories showroom on Canton Road, one of the most expensive commercial real estate locations in the city.

Singapore’s footwear and accessories label Charles & Keith expanded with its seventh store in the territory, followed by Lululemon with its largest Hong Kong flagship – both housed under Harbour City mall, a tourist-dominated destination. Lego, franchised by Kidsland International, also opened its fifth store as kids stay homebound.

But the most anticipated new entrant is Nestle’s owned Blue Bottle, who has finally opened its doors to its two-storey 3,000 square foot space in Central on a six-year lease. Queues snaked around the block before its opening hours in typical Hong Kong fashion as artisanal coffee fans were eager to take their first Instagram snapshot to mark their victory.

Hong Kong takes over Golden Week

May 1st is known as another ‘Golden Week’ in China where last year saw 839,000 visitors travel from the mainland to Hong Kong for a week of tax-free shopping frenzy. Just as Chinese consumers are seen to go on a ‘revenge spending’ splurge post-lockdown, the 14-day quarantine laws – in addition to the limited seven-day tourist visa – have deterred cross-border shoppers making their annual visit. In turn, only 361 visitors (most likely expat Chinese workers) stepped into Hong Kong during the holiday period.

Meanwhile, pro-democratic protestors started their own shopping campaign dubbed the ‘Hong Kongers 5.1 Golden Week’, spinning their own meaning to the date in reference to the protest slogan “five demands, not one less”. The event was created to boost homegrown businesses as part of the ‘yellow economy circle’ movement where consumers patron businesses that are strongly supportive to the protests, as opposed to pro-government parties which are coded with the color blue in symbolization with the Hong Kong’s police uniforms. As the strained city has become divided by political parties, special apps have been developed to provide a directory of ‘yellow’ businesses for protestors to discover and support throughout the movement. The organizers of the event revealed 400,000 consumers and 2,305 businesses including restaurants, bubble tea shops, leather crafters and the sort participated in the campaign, generating over HK$100 million in revenue.

Although Hong Kong has always been known to be a shopping paradise, all the chain closures so far really have been those that carried a high dependency on tourists and couldn’t sustain popularity with locals. Affected businesses were also those on the brink of their death pre-COVID with uninspiring retail offerings amidst the colorful competition and constant new entrants. Once the quarantine laws are lifted for the neighborhood border, the tourists will arrive in swarms relishing their newfound freedom, but inevitably will be met by the rise of the protests yet again.

Even still, as Hong Kong begins to slowly reboot itself and the once-quiet streets open back up to crowds enjoying the summer months, there is optimism that the retail scene will rebuild itself – perhaps one that’s actually designed for Hong Kongers.