Shuttered shopfronts show impact of e-commerce on Hong Kong’s retail sector

E-commerce and offline retailers must combine their efforts at making Hong Kong shopping more of an ‘experience’

PUBLISHED : Wednesday, 13 June, 2018, 8:03am
UPDATED : Wednesday, 13 June, 2018, 10:00am

The rise of e-commerce has already spelt the end for some of Hong Kong’s best-known bricks-and-mortar stores, even though the city still lags behind other markets in embracing the new shopping model.

In Causeway Bay, on the third floor of the once-bustling Island Beverley Shopping Centre in Causeway Bay, just 15 out of about 60 units were open during a recent visit there by South China Morning Post. Its vacancy rate has been as high as 70 per cent in the past.

Two blocks away, Causeway Place also has around 10 shops on each floor empty with “to let” signs hanging on their fronts.

“Retailers who are not offering anything different will continue to struggle, as they can easily be replaced by online shopping,” said James Assersohn, local director of retail at JLL in Asia-Pacific.

Boutique stores selling cheaper clothes, shoes and accessories, particularly targeted at younger buyers are fast losing customers to online stores.

“I used to go to Island Beverley to buy clothes every weekend, but I have not been there for more than six months,” said Shirley Chiu, a second-year university student.

“Most of the clothes I used to buy at those shops, I can now get from Taobao, and at a cheaper price. Why should I brave the hot weather and go there?”

According to Hong Kong Trade Development Council, the city’s e-commerce market accounted for just 3.1 per cent of total retail sales in 2016, and compared with China’s 17.1 per cent. By 2021, the ratio will further just to 6.1 per cent in Hong Kong, while soaring 24.7 per cent in China.

However, its figures show that online consumption continued to rise at a compound annual growth rate of 15.1 per cent, compared with just 1.5 per cent for overall retail sales over the same period.

“Online shopping in Hong Kong is still seen as inconvenient by many, compared with other cities around the world,” said Assersohn.

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“But once that’s been figured out, it will accelerate. The slower bricks-and-mortar retailers in the city react to take on an e-commerce strategy, the more danger they are in.”

A recent survey by JLL shows a level of optimism they will embrace more online shopping, with 72 per cent of retailers and 90 per cent of landlords surveyed expecting to see significant growth in online sales over the next five years.

“E-commerce will get more popular in Hong Kong in the next few years,” said Lawrence Wan, senior director of advisory and transaction services for retail at CBRE in Hong Kong.

“Retailers and landlords should become better prepared for omni-channel retailing and provide value added services in addition to pure selling. Online and offline retailing can be complementary.”

Shirley Chiu says the “experience” of shopping is the buzzword of the moment in retail.

Buyers actually go to the shops and stores where they can get a social experience, with friends and family which they cannot get at home through clicking online.

“I still hang out with friends in those stores and places so I can try out new things,” said Chiu.

“I went to IFC last weekend to try Shake and Shack. The pictures I took there got dozens of ‘likes’ on Instagram.”

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Experts see that retailers working together, offering both online and offline, can create synergies and capture both traditional and younger consumers.

Mini Leung, a local fashion buyer running a multi-brand retailer in Sheung Wan selling designer jewellery, says more than half of her sales are now made in her Taobao shop and WeChat store.

But she is also considering expanding her bricks-and-mortar store to provide a space for silver jewellery and a DIY workshop.

“It is not fair to say that online shopping is a negative thing to us, instead, it is complementary to my business,” said Leung.

“It helps me build my brand; at the same time, the more people come to visit my offline store, the more positive feedback and higher ratings they post online, which in turn will boost customer loyalty.”