Source:
https://scmp.com/property/hong-kong-china/article/2157442/greater-bay-area-initiative-has-brought-hong-kong-closer
Property/ Hong Kong & China

‘Greater Bay Area’ initiative has brought Hong Kong closer to 68 million mainland China consumers

Improved connectivity will boost foot traffic, local brands and retail rents

A mall in Hong Kong. The increasing presence of mainland China retailers and brands is expected to provide long-term support to retail rents in the city. Photo: Dickson Lee

The Hong Kong retail market is evolving. Whether it is because of publicity around the “Greater Bay Area”, huge rail and bridge projects, or changing consumer behaviour in the digital age – things are happening in the shopping streets of the city that no one could think of five years ago.

Undoubtedly, improved connectivity brings in more foot traffic. Hong Kong now finds itself within easy reach of a vast pool of 68 million shoppers who are looking for somewhere different to take a break in than the usual metropolises of Guangzhou, Shenzhen and Dongguan. WeChat provides instant and detailed tips on bargains, and Alipay makes it easy for mainland consumers to make payments in the city.

Rucksacks and trolleys are preferred over suitcases to carry all that shopping. We are now in the age of day trippers.

Indeed, the number of mainland visitors who prefer shorter, same-day visits to Hong Kong is on the rise. In 2007, Hong Kong received 6.4 million such visitors, who accounted for 40 per cent of all mainland visits to the city. In 2017, this was three times more, or 25.9 million, representing 60 per cent of total mainland visits.

With the Hong Kong-Zhuhai-Macau bridge and the Express Rail Link opening this year, people from further afield in the Greater Bay Area can now do a whirlwind day trip to Hong Kong just like their Guangzhou counterparts, thanks to ever-expanding transport networks. So it is not hard to envisage the number of day trippers reaching 30 million in two or three years’ time.

Day trippers, or same-day visitors as they are officially called, no longer buy just watches and jewellery. Because they can come and go a lot more easily than before, they are beginning to treat Hong Kong as one of their “local” shopping destinations, very much like residents in Yuen Long going shopping in Tsim Sha Tsui or Causeway Bay, which are an hour’s bus trip.

This partly explains why the mid priced segment – comprising mainly health care products, medicines and cosmetics – is recording the fastest recovery in the market. It could, perhaps, also explain why Hong Kong’s development of experience-based retail is gaining traction in the age of internet shopping. As we have observed, while people can now buy and return goods with a swipe on their phone screens, a city’s heritage and culture cannot be enjoyed online.

The rise in day trippers from mainland China is the reason Hong Kong’s mid priced segment, which includes sectors such as medicines and cosmetics, is recording the fastest recovery in the market. Photo: Edward Wong
The rise in day trippers from mainland China is the reason Hong Kong’s mid priced segment, which includes sectors such as medicines and cosmetics, is recording the fastest recovery in the market. Photo: Edward Wong

In terms of cultural uniqueness, Hong Kong perhaps offers more variety than any of the Greater Bay Area cities, save perhaps some parts of Guangzhou.

Dining in Hong Kong-style “cha chaan teng” or “bing sat” restaurants is one of the many enjoyable things to do here. Nowhere else in the Greater Bay Area can people enjoy international events such as the Hong Kong Wine and Dine Festival and Art Basel. The city’s recent revitalisation of heritage sites such as Tai Kwun also sets a good example for mainland cities, which often opt for the new and shiny. Hong Kong’s country parks also draw in mainland hikers in droves.

This development is not only good for Hong Kong’s retail foot traffic – it will also help the city promote its home grown brands among mainland visitors. This is already a welcome addition to its traditional role as a marketplace for international brands. In the long run, these Hong Kong brands could flourish in the vast mainland market, following in Tsui Wah’s footsteps.

Meanwhile, the Hong Kong retail landscape itself has also been changed by an inflow of mainland brands. Chinese food and beverage operators and lifestyle product retailers are already entering Hong Kong’s market to take advantage of the city’s reputation for quality, in an attempt to brush up their corporate image.

Given the significant inflows, we expect mainland operators will account for 15-20 per cent of the city’s retail tenant mix in five years’ time. We recently worked with Lao Pu, a jeweller, and Xi He Ya Yuan, a new Peking duck restaurant, helping them to open their first Hong Kong locations in Harbour City, Tsim Sha Tsui.

The development of the Greater Bay Area is likely to encourage other retailers to leverage this market to boost their global presence and popularity. And in the end, the increasing presence of mainland operators is expected to provide long-term support to retail rents.

Of course, the benefits of a regional integration as huge as the Greater Bay Area will not be limited to foot traffic alone. Enhanced mutual cultural acceptance and the increased spending power of the middle classes benefiting from the hi-tech industries in the Greater Bay Area have begun to work together, creating added value for the retail market, which goes beyond the mere square footage of each store.

David Ji is director and head of research and consultancy for Greater China at Knight Frank and Helen Mak is senior director and head of retail services at Knight Frank