Hong Kong retail ‘will recover’ says analyst

The Hong Kong retail industry – hammered by declining visitor numbers from the mainland will recover, says leading analyst Pascal Martin, a partner at OC&C Strategy Consultants.

As reported earlier this week, Hong Kong retail sales in October plunged by 24.3 percent year on year – the largest decline since records began. That followed a revised fall of 18.2 percent in September and several retailers have told Inside Retail Asia they expect November’s figures to be even worse.

But Martin has a positive spin: “The Hong Kong market will recover, as it always does. As soon as Chinese tourists are reassured about the safety and convenience of visiting Hong Kong, they will come back.”

However, he cautions than the recent events have accelerated “a structural trend” that Hong Kong is not as attractive a retail destination as it used to be.

“There are a variety of reasons contributing to this trend – among them the lower China taxes and duties, and brands’ global pricing structures that have become much more homogeneous and harmonized, with smaller price differences across markets because of the transparency created by the Internet.

“Additionally, Chinese travelers also have a greater diversity of shopping destinations beyond Hong Kong, with Japan, South Korea, France, and Italy becoming increasingly popular.”

Martin says many brands that have built extensive retail footprints in Hong Kong on the assumption that Chinese tourist numbers and spending power will continue to grow without limit will have to adjust their presence in Hong Kong.

“The impact of this trend will not be felt immediately, but gradually, as brands reach the renewal date of their stores, one store at a time, over the next few years. There will be adjustments in the number of stores, and adjustments in rent levels.”

Meanwhile, the Hong Kong Retail Management Association this week predicted Hong Kong retail will experience a “low double-digit drop” in sales for the full year.