Retailers feel winter chill
THE most bored workers in Hong Kong today must be the shop assistants, who sit around filing their nails, humming, 'Where have all the clients gone?' Perhaps they should form a trio with the property agents and the stock sales teams.
Where have all the shoppers gone? Back to their flats, to eke out what funds are left after they have paid the mortgage, perhaps.
Or off to other cities where rents are not so exorbitant, wages so high, hotel rooms so scarce and expensive, and goods offer the same value on which Hong Kong once prided itself.
Those good old days are fading fast as the retail outlets pump up their prices in an effort to keep profits growing.
The sub-three per cent growth in some circumstances would have provoked a mega pile-it high, sell-it-cheap response. Anything to move the goods.
But in Hong Kong the law of diminishing returns seems to be suspended. There may be more SALE signs around, but they probably reflect the clearance of cold weather clothes after this unseasonably benign weather.
Instead of being slashed, prices have risen 9.2 per cent: above inflation, and a big enough rise to almost guarantee customer resistance.
Increasing prices might keep profits moving in the shorter term, but the impact must come, for the money is just not in the pockets of the shoppers.
As the retail figures emerged, the Monetary Authority was discussing mortgage securitisation. The only blot on Hong Kong's potential credit rating for this form of instrument was the amount committed to repayments each month.
No less than 50 per cent, and with interest rates likely to go up before they come down, that burden is going to increase further.
If ever market forces should be bearing down on retail rents, it should be now, but they appear to be defying gravity.
Recent estimates suggest last year's 10 to 20 per cent increase will be followed by a further five to 10 per cent this year. Apparently this reflects competition for space.
How long retailers will fight for square feet when the returns are dwindling faster than the costs are rising remains to be seen.
What is sure, is that the sombre outlook for sales painted by analysts and retailers is all too accurate a reflection of the real world in which the sector is now finding itself.