Hongkongers head north to bulk buying megastores, but city ill-equipped to host its own, experts say
- Bargain-hunting Hongkongers are searching online about hypermarts Sam’s Club and Costco Wholesale, set to open its new store in Longhua district next week
- They could further drain customers away from Hong Kong retailers and replicating the big box stores in city may be impossible, given land and logistics costs
Hongkongers are showing a keen interest in the membership megastores offering bulk buying over the border, but experts are sceptical the city can replicate their success locally given the scarcity of land and high cost of logistics.
The opening of Costco Wholesale’s new store in Shenzhen’s Longhua district next Friday comes as bargain hunters from Hong Kong continue to go north for shopping deals and cheap meals, putting fresh strain on the city’s businesses.
Google Trends showed that the search popularity among Hongkongers for Sam’s Club – a US warehouse retailer that opened its first mainland outlet in Shenzhen more than 27 years ago – began to surge two months ago and peaked over the New Year’s Eve weekend. An outlet in Qianhai became its fourth store in Shenzhen over the summer.
But the buzz over Costco has gathered pace recently, driven by media coverage of a preview event, with the search interest in the new store surpassing Sam’s Club on Friday among Google users in the city.
Costco gained further publicity after it teamed up with WeChat Pay to give away coupons to Hong Kong users and as group tours were launched to the new store.
A Facebook post promoting a HK$299 (US$39) two-night tour including a visit to the Costco store and an annual membership drew 580 responses in the comment section asking for details just an hour after it was uploaded.
Mandy Hu Mantian, an associate professor at the marketing department of the Chinese University of Hong Kong, said that, apart from the lower prices, the weaker yuan and the widespread use of electronic wallets accepted by mainland merchants had contributed to residents’ fondness for warehouse stores across the border.
“If a place can offer consumers a wide variety of products with good quality at low prices, there is no reason why consumers wouldn’t want to shop there,” she said. “Superstores save consumers’ search and travel costs, making them a valuable option.”
You feel a strong desire to buy something because you are excited about being there
Entrepreneur Baniel Cheung Tin-sau, also an adjunct assistant professor at the University of Hong Kong’s business school, has visited the Sam’s Club in Shenzhen and some Costco stores in Japan.
He said the bargains available through warehouse shopping were a lure, but prices were only part of the appeal of membership stores.
“The massive space feels very refreshing,” he added. “Even though there can be many people, it still feels spacious and has everything on offer. And prices are way cheaper there.”
Cheung said there was a good chance customers would buy more than they needed, and added he once brought home a pack of sliced fresh pineapples that his family could not finish after five days.
“You feel a strong desire to buy something because you are excited about being there and don’t want to go home empty-handed after making a two-hour trip,” he said.
Shop till you drop: mainland bulk retailer trips a hit with young Hongkongers
Costco has been looking at options to open a store in Hong Kong, Prudence Jang, general manager of the retail giant’s mainland China division, said, but she told reporters the company had not been able to identify a suitable location.
Hu predicted Costco would not be able to replicate its mainland success south of the border, where real estate and logistics costs were much higher.
“Additionally, given the limited housing conditions, there is not significant demand in Hong Kong for quantity discounted products as consumers may not have sufficient storage space,” she said.
Cheung added a new Costco store could generate long-term economic benefits for an otherwise remote location in countries such as Japan, but scarcity of land in Hong Kong meant it would likely be prioritised for policy priorities such as expansion of the technology sector.
Can proposed district fairs in Hong Kong convince people to spend?
Retail sector legislator Peter Shiu Ka-fai agreed that Hong Kong’s businesses would have to accept the “new norm” of losing patrons to membership stores in Shenzhen.
City retailers could now only pin their hopes of recovery on eased restrictions on travel permits for Guangdong residents headed to Hong Kong, he said, a reference to a proposal submitted to Beijing by some Hong Kong deputies to the National People’s Congress, the country’s legislature.
“There are 70 to 80 million people in the Greater Bay Area and when they come and stay in Hong Kong, they will buy things,” Shui added. “This is an issue that needs to be dealt with as soon as possible.”
