Why online retailers are opening Hong Kong pop-up stores

Numerous reports have been written on how eCommerce spells the death for brick-and-mortar stores in the retailing industry.

But others have written on how the preference of customers taking in the whole in-store shopping experience will ensure that there will always be a need for real world stores.

Unlike in other markets, eCommerce in Hong Kong has yet to gain a strong foothold. According to Euromonitor International, online retail sales accounted for only 3 per cent of the city’s total retail sales in 2015. The insignificant share of online sales has even seen the tables being turned, with online retailers opening offline stores to communicate brand value and as a means to convert bricks and mortar store shoppers to online platforms.

Online fashion retailer Zalora is just one brand which opened Hong Kong pop-up stores last year to test the waters without committing to a long-term lease. Other than cost concerns, the use of a pop-up store also allowed the retailer to move the store around various shopping centres in the city to maximise exposure.

Real world stores opened by online retailers are generally designed for experience and as a place to educate potential customers to buy online. Similarly, Line – the mobile social networking platform – also opened a pop-up store last year, before opening a more permanent store to sell Line character merchandise as well as build its brand image and customer base.

While pop-up stores are the preferred format for Click-to-Brick retailers (at least at the market entry stage), when it comes to setting up a more permanent store, the overwhelming preference is to be located in prime shopping centres in core locations since they provide an all-weather shopping environment, controlled trade mix and a more focused customer base.

For landlords, the allure of pop-up stores is that they can better utilise space within the shopping centre and minimise void periods; an important consideration given the current challenges facing the city’s retail sector. The ever changing goods offered by different pop-up stores can also freshen the shopping experience of customers.

The Click-to-Brick trend is still at a nascent stage, hence it is too early to conclude whether it will establish as a key driver of demand in the city’s retail leasing market over the longer-term. In the interim, it will be a welcome addition to shopping centre landlords who continue to look for new means to differentiate against their competitors amid an increasingly challenging retailing environment.