Three ways Hong Kong can turn around its retail fortunes
Hong Kong, once a shopper’s paradise, is battling a decline in visitor numbers and retail spending. But it needn’t be that way, says JLL’s James Assersohn
For a long time Hong Kong was a shopper’s paradise, with flagship stores of international brands found nowhere else in Asia backed up by an amazing restaurant scene.
It was cool and had an excitement about it that attracted over 3 million Chinese tourists every month to shop, eat and shop some more. This surge of Chinese money led to a colossal boom to the retail industry, and for many global retailers Hong Kong had the most productive stores globally.
However the last 23 consecutive months have seen retail sales tumble and tourism spending, the lifeblood of the retail economy, down by an estimated HK$3.75 billion a month.
This is a problem not only for retailers’ shareholders but for the 10 per cent of Hong Kong residents who are employed in the retail industry.
The decline in retail sales is definitely starting to flatten off but in my opinion there are things Hong Kong could be doing to improve the speed of this recovery and spur future growth. Mainland Chinese, who represent close to 80 per cent of all tourists, on average spend HK$2,522 on shopping when they visit for a single day. If they stay overnight, however, that figure triples to HK$7,100. The key to Hong Kong’s retail market rebounding is therefore clearly linked to its appeal as a fun and interesting destination to visit for more than just the day. And as destinations around the globe are vying for this spending power, Hong Kong is facing great competition.
Taipei’s Mayor Ko Wen-je recently described Hong Kong as boring and whilst I disagree, it needs to improve its appeal to tourists in order to improve the retail market.
Here are three ways Hong Kong could make itself a better place to shop, a more appealing place to visit and attract the high-spending consumers:
Create the right environment
Retailers’ sales are sharply down, which has led streets once dominated by the ubiquitous luxury watch and jewellery shops to change. The variety of shops in areas like Causeway Bay is becoming more diverse and interesting. Yun Ping Road for example now has the very cool Korean eyewear brand Gentle Monster and beauty brand Memebox. The lingerie giants Calzedonia Group and Victoria’s Secret are also set to open flagship stores in the coming months.
Diversity of interesting and unique shops is important to the shopper. However, the environment they are in is equally crucial. Queen’s Road Central is one of Hong Kong’s most important retail destinations, but its busy and narrow pavements create an environment undesirable to spend time and shop in. Therefore at the weekends Queen’s Road Central should be pedestrianised from Ice House Street to the escalators. This would create a beautiful environment and attract families, tourists and locals to spend time in a 500 metre car-free oasis. Consumers could amble down the streets surrounded by pop-up cafes, art exhibitions and some of the best shopping in the world. Not only would this create more sales for retailers, it would also improve the livability of the city.
Play to your strengths
In order to bring back repeat visitors, Hong Kong needs to rejuvenate itself. There are only so many times you can ride a packed tram or walk along the Tsim Sha Tsui promenade. And since now Disney has a better theme park in Shanghai, Leshan has a bigger Buddha and Kyoto has more beautiful temples, we are left with Hong Kong’s most valuable asset: its natural beauty and country parks. Exercise, healthy living and experiences are now the top priorities for young, affluent Chinese consumers. Hong Kong has some of the most accessible and picturesque hiking in Asia and offers something suitable for all fitness levels. These natural resources must be promoted better. By making Hong Kong synonymous with a healthy, adventure tourism destination, a new swathe of affluent tourists would come back repeatedly. These refined leisure consumers are big spenders and would boost the retail and restaurant economy.
Lure the bargain hunters
Finally, everyone loves a bargain. The success of Alibaba’s Singles Day promotion that sees online sales in China of almost US$18 billion in one day is proof of that.
The Korean tourism board has been very successful in the last few years by creating the ‘Korea Grand Sale’ where the majority of department stores and retailers hold sales at the same time and drive record traffic to their stores. With the help of the tourism board, an association of shopping mall owners in Hong Kong could easily create something similar and, through a marketing campaign, make
Hong Kong the go-to destination for shopping trips.
Hong Kong is still one of the top performing markets in the world for retailer sales. The retail market is, however, under assault from a more demanding consumer who, through online shopping, can make purchases from almost anywhere in the world.
Hong Kong needs to create experiences and adapt to the changing desires of consumers in order to stay relevant, or it risks losing its crown as the retail capital of Asia. The retail industry employs 260,000 people. The welfare of those people and the families they support rely on it.
James Assersohn is a director of Asia-Pacific retail at JLL