The slump in Hong Kong's luxury retail sector does not necessarily mean the return of traditional mom-and-pop shops in prime shopping precincts. But stocking hawker Au Yuk-ho, 73, believes she is a step closer to returning to the tiny store in Causeway Bay that she rented for 12 years, betting the retail downturn will drive down sky-high rents.
"The lease of the store has changed hands three times, which tells you how difficult it is to make the business financially viable," Au said of the 200 sq ft space in Lee Garden Road she was forced to quit two years ago. "I hope one day I can afford to rent the store again."
Helen Mak Hoi-lun, a senior director of Colliers International, doubts this. She said the potential rent drop could not reverse a 68 per cent jump in the past five years, according to a quarterly index compiled by Colliers.
"It is still hard to see smaller shops such as wonton noodle stores or bakeries coming back," she said. "If the city wants to see this happen, government initiatives are needed."
Mak was speaking a day after the government reported a 9.8 per cent fall in retail sales in April, the biggest in five years.
She said consumer demand would remain lacklustre and retail rents would drop 5 per cent on average in the prime shopping areas of Causeway Bay, Central, Mong Kok and Tsim Sha Tsui in the coming 12 months.
The fall would be steepest in Causeway Bay, the world's most expensive shopping district in terms of property prices.
"Obviously, there have been more vacant shops in Causeway Bay than other prime shopping districts recently," she said.
Mizuho Securities chief economist Shen Jianguang said the tourist-driven retail boom since the introduction of the individual traveller scheme for mainlanders in 2003 was coming to an end.
Last year, 40 million mainland visitors came to Hong Kong, generating about a third of the city's retail sales. Their number has been forecast to hit 100 million by 2023, but the government is reportedly looking at reducing the number of mainland visitors by as much as 20 per cent.
Shen attributed the lacklustre sales to a drop in mainland tourists and shifting spending patterns. He said the government should identify ways to entice tourists from elsewhere and to spur spending.
One of the most touted possibilities is a cut in the number of mainland travellers, mostly from Shenzhen, who use multiple-entry permits to make day trips to buy necessities and low-value goods. Some are so-called parallel-goods traders who buy items to resell.
Lee Shau-kee, chairman of developer Henderson Land, said its malls, Hong Kong's retail sales and commerce would suffer if the government lowered mainland visitor numbers significantly. "It should cut the numbers of day-trippers, who are primarily parallel importers," he said.
George Hongchoy, executive director of The Link Management, which operates dozens of shopping centres, warned of a ripple effect if the numbers were cut. "For example, a salesgirl in Tsim Sha Tsui will earn less commission as a result of fewer mainland spenders. The salesgirl - our targeted customer - will in turn spend less, too," he said.
Andy Kwan Cheuk-chiu, an economist with the ACE Centre for Business and Economic Research, said some watch and jewellery shops could go under in the next two months. A 20 per cent drop in mainland visitors could raise the unemployment rate by 0.3 percentage points, he said.
In the meantime, Au keeps her hopes alive by hawking her wares outside her old shop.
Additional reporting by Peggy Sito