Mauled by online shopping, small Hong Kong stores forced to adapt

The city's bricks-and-mortar shop owners are looking for fresh ways to revitalise their businesses

PUBLISHED : Monday, 19 October, 2015, 6:45am
UPDATED : Monday, 19 October, 2015, 9:55pm

In bustling Mong Kok, W Plaza is an anomaly - it's eerily quiet, with barely anyone browsing its 120 or so shops spread over three floors. Formerly known as Chic Mall, it is undergoing renovation and the search is on for new tenants specialising in wedding dresses and accessories, and other women's goods.

The management believe it's a timely move. Small shops selling cheap trainers, phone accessories and other knick-knacks - a long-time staple of Mong Kok and Causeway Bay - are feeling the pinch as more customers turn to online shopping, operators say.

In order to survive, malls and their tenants are being forced to find other ways to stay in business. One solution is to offer something that's difficult to find online.

Ken Lam, rental manager at W Plaza, believes the mall can turn its fortunes around by specialising in wedding accessories. "Quality is not a big concern for online shoppers; they just want bargains," he says. "Marriage is a once-in-a-lifetime affair that people won't skimp on. Brides-to-be need to try on the gowns and have many fittings. You can't do that online."

Lam adds that "young women also tend to prefer buying cosmetics in bricks-and-mortar shops" because they can test the quality of the products.

Even mid-range malls - not the cookie-cutter types renting to the same chain outlets - have been hit by the popularity of online shopping, resulting in many vacancies. A quarter of the 100 or so shops in Causeway Bay's Island Beverley Centre are vacant. Seventeen stand empty in the 200-shop Rise Shopping Arcade in Tsim Sha Tsui.

Winnie Shin, who manages rents in a number of malls including Sino Centre and Argyle Centre in Mong Kok, and New Town Mall in Tsuen Wan, says rents have dropped 20 per cent since the start of the year.

"Shops at Ginza Plaza in Mong Kok, which are about 50 sq ft, now cost just HK$5,000 a month to rent. To survive, some of the shops there have started to serve as collection points for online shopping sites," she says.

Argyle Centre, once a shopping paradise for youngsters on a shoestring budget, had 20 empty units last month - more than 5 per cent of the space in the four-storey mall. An ice cream vendor, who gave his name as Ken, says he has been renting a shop on the third floor for more than a decade, but business has been going downhill over the past few years.

"There are fewer and fewer people coming here. I am paying HK$20,000 a month in rent. It's getting more difficult to run my business every year," he says.

Another shop owner, who gave her name as Ms Wong, has a boutique on the Arygle Centre's third floor. She shares Ken's gloomy outlook. "People's shopping habits have changed. We can't compete with online shops because they don't have to pay rent. There are also more and more fast-fashion chains coming to Hong Kong selling mass-produced clothes at cut-throat prices."

One such chain is Swedish behemoth H&M, which will open a new outlet in Gala Place on Dundas Street in Mong Kok formerly occupied by independent shops, some of them turfed out to make way.

Two years ago, also in Mong Kok, all the small shops in King Wah Centre made way for a Sincere Department Store.

And it's not just fashion retailers that are being squeezed by the online shopping effect.

The popular 759 Store discount chain launched 759online in August, selling pet accessories and household goods. Meanwhile, outspoken Hong Kong Television Network boss Ricky Wong Wai-kay recently launched a HK$30 million advertising campaign for his HKTV Mall online shopping portal, to rent all 3,268 billboards at the MTR's 51 stations.

According to market research firm Euromonitor International, internet retailing in Hong Kong is expected to grow by six per cent year-on-year in 2015, with a sales volume of HK$11.9 billion.

Not all bricks-and-mortar businesses are prepared to roll over and die. Rise Shopping Arcade in Tsim Sha Tsui, for example, is fighting back with a promotional offensive, including a short film competition. The winning entry was the story of an unattractive young man who, through shopping at the mall, is able to complete a makeover and become popular with the opposite sex.

Sam Hui Kin-sang, director of the Hong Kong Computer Industry, says its 700 shopowner members launched a virtual mall in collaboration with Yahoo in June in an attempt to boost their flagging incomes.

"Youngsters who were born in the '80s and '90s like to buy computer products online. Also, the advent of smartphones means many computerised devices, like GPS and music players, have become obsolete, so we have fewer products for sale. More computer shops are closing down," Hui says.

Some members have given up on the Hong Kong market altogether, he says, having turned to opening online shops specialising in Taiwanese and Japanese products targeting mainland shoppers.

Online computer emporiums have become a worldwide trend, Hui says, citing the example of Taiwan's dominant PChome, and Yahoo for Hong Kong businesses. Mainland electronic products retail giant Suning, meanwhile, is focusing less and less on bricks-and-mortar shops, and investing in logistics and warehouses across China. Speedy delivery times is the key to competitiveness for online emporiums, Hui adds.

Indicating just how much the computer business has been transformed in recent years, the annual Hong Kong Computer and Communications Festival, held at the Convention and Exhibition Centre in August, incorporated online shopping for the first time. Organisers collaborated with Yahoo to launch online sales in advance and buyers collected these purchases at the festival. Visitors were also able to shop online at the event and have the electrical appliances and other goods delivered to their homes.

Hui believes the future lies in finding a balance between online and offline shopping.

There are fewer and fewer people coming here. I am paying HK$20,000 a month in rent. It's getting more difficult to run my business every year
Argyle Centre ice cream vendor

"Just like people go to eat at a place after seeing its Facebook promotion, online shopping can actually boost sales traffic at physical shops. Since the trial launch of our online platform in June, we've had about 20 daily transactions. Some customers visit physical shops after seeing products online. The trend is picking up fast on the mainland," he says.

Hui and his team recently set up three "experience shops" at a 3,000 sq ft mall in Guangzhou.

"We displayed the products we're selling online at the shops for customers to get first-hand experience," he says. "Our assistants were able to teach shoppers how to handle the products, and if customers wanted to buy, we had tablets that allowed them to make the online purchase on the spot."

Lam Hei-suen has had a similar experience. She recently rented a 150 sq ft shop in W Plaza for HK$9,000 a month - after running an online clothing business since 2008 - for mainly practical reasons.

"I have many loyal customers who asked me if I had an actual shop because they sometimes want to see the products before making a purchase," she says. "The store also acts as a collection point for people who have placed orders online."

And, of course, as any shopaholic knows, "once they come to pick up their online purchase, they might see something else they like and buy that too", she says.