What is the future for Hong Kong’s luxury retailers, as China’s big spenders avoid city of protests and coronavirus quarantines?

Mainland Chinese tourists spent HK$7,029 (US$905) per person in 2018, and made up 78.3 per cent of Hong Kong’s visitors in 2018

Preliminary data points to impending doom, as the average daily traffic to Hong Kong plummeted to fewer than 3,000 in February, from almost 200,000 a day in the same period a year earlier, according to the Hong Kong Tourism Board

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Published: 10:30am, 15 Feb 2020Updated: 11:24am, 17 Feb 2020

Zhang Zisheng has stopped shopping in Hong Kong. The 24-year-old salesman no longer feels welcome, even if his home in Jiangmen is a mere 90-minutes’ ride away on the high-speed rail, and he speaks the same Cantonese as Hong Kong’s residents.

“I’m worried that I, as a mainland Chinese visitor, may be physically attacked” in Hong Kong amid the city’s anti-government protests, which have taken on a nativist slant in recent months against visitors coming across the southern Chinese border, Zhang said during a recent interview with South China Morning Post. “Hong Kong’s protests have affected my [decision] to visit” the city, he said, adding that he is going to the former Portuguese colony of Macau instead because “there is no sign of riots, so I could rest assured while shopping.”

Zhang’s disquiet matters, because mainland Chinese tourists – and their average spending of HK$7,029 (US$905) per person – made up 78.3 per cent of Hong Kong’s visitors in 2018. Tourism contributed to an estimated 32 per cent of the city’s services output in recent years, up from 21 per cent in 2003.

As Hong Kong shut most of its border checkpoints with mainland China to stop the coronavirus outbreak from spreading in the city, the dearth of visitors is upending the local retail industry. Top-tier designer brands with their loyal legions of customers, fat profit margins and owners with deep pockets may be better placed to weather the slump than second-tier brands that lack the same advantages, retail analysts said. Taken together, this may be the beginning of Hong Kong’s demise as an Asia-Pacific hub for shopping, they said.

“Hong Kong has become less and less of an international retail hub,” said Ashley Micklewright, president and chief executive of the Bluebell Group, a distributor of luxury and premium brands in Asia. “Hong Kong used to be 20 per cent of our Asia business. It’s now 5 per cent. We had more brands in 2013” during the peak, he said.

Hong Kong’s retail sales will shrink by 2.5 per cent to HK$420 billion (US$54 billion) this year, according to a forecast by PwC before the onset of the coronavirus outbreak, which has sickened 53 people with one fatality in Hong Kong at last count. As the outbreak raged on, schools, offices, restaurants and many shopping centres had shut, forcing millions of people to work from home and remain homebound. Mainland Chinese visitors, many of them barred from entering the city, disappeared altogether.