Total retail sales in May, provisionally estimated at HKD34.5 billion (USD4.4 billion), was up 18.4 percent year-on-year, boosted by the first round of consumption vouchers issued by the Hong Kong government in April and May, according to real estate services firm CBRE.
Below, a look at key trends influencing Hong Kong’s retail landscape.
Local consumption has returned to pre-pandemic levels
“The gradual recovery for the retail market is tracking prosperously with local consumption already returned to the level in 2019,” says Lawrence Wan, senior director and head of advisory and transaction services, retail, at CBRE Hong Kong.
The first half also registered 870,000 square feet of retail leasing volume – the highest for a half-year period on record. Among the districts that drove the drop in vacancy rates is Causeway Bay, which recently secured a high-profile luxury retailer in Chanel, among others, in May.
“Overall, retailers strengthened noticeably in H1 2023. While pharmacies, galleries, and some F&B chain groups are now looking to expand quickly, luxury brands remain largely cautious and [it] will take some time for them to further observe the latest spending pattern of mainland Chinese tourists before they will be more engaged in leasing.”
Retailers count on Hongkongers’ appetite for premium F&B
While prestige beauty brands and jewellers added presence to high streets, F&B openings comprised 32 percent of new leasing activity in the first half.
From California-established fast casual concept Eggslut to Feuille, a new restaurant from acclaimed French chef David Toutain operated by ZS Hospitality, Hong Kong is seeing a renewed surge in F&B openings.
K11 Group, in particular, has ambitions to position itself as Kowloon’s premier culinary hub, bringing a sister restaurant of Bangkok-based Thai restaurant Le Du, which earned the No. 1 spot on this year’s Asia’s 50 Best Restaurants list, to K11. Consistent with reported leasing trends, other new concepts introduced by K11 Group include Maison Margiela Fragrances, Clé de Peau Beauté, and Maison Kitsune.
Kevin Lam, executive director and head of retail services, agency and management for Hong Kong at Cushman & Wakefield, notes, “The spending pattern of mainlanders has changed from ‘shopping-centric’ to more ‘experience-based’ tourism.”
Jewellery and watches, fashion, and beauty popular among tourists
Jewellery and watches, fashion and accessories, and medicines and cosmetics were the most coveted product categories for tourist shoppers, with year-on-year growth rates of 76.7 percent, 54 percent, and 37.4 percent, respectively.
Hong Kong’s Central district saw the strongest increase of 7.1 percent, supported by both high-end tourists and local consumption.
The old way of shopping is out as omnichannel retail thrives
“Shopping as we know it today is a blend of both physical and online shopping,” Kai Tang, head of Hong Kong at Adyen, a Dutch-headquartered payment company, points out. “The reason’s simple: consumers enjoy the convenience online shopping brings and the interactivity they get when visiting a physical store.”
It is unlikely that either format will trounce the other in the near future, as both brick-and-mortar retail and e-commerce remain key priorities.
Instead of focusing on sales channels as individual touch points, retailers must design seamless end-to-end experiences.
“In Hong Kong, we found that more and more shoppers are looking for such experiences, [such as] in-store kiosks that enable self-checkout, home delivery option for purchases made in-store, and mobile apps for self-checkout in stores,” Tang says. “Consumers are channel-agnostic, meaning they want to be able to switch easily from one channel to another when shopping.”
When it comes to loyalty programmes, Hong Kong retailers are behind – but are working on catching up
Hong Kong retailers traditionally focused on new customer acquisition over nurturing customer loyalty, but that’s already changing.
Seventy percent of Hong Kong shoppers said personalisation is important and they want to see more personalised discounts and offers at their most frequented shops, according to Adyen Hong Kong’s retail trends report.
“For retailers, this can take the form of offering promotions on an item that the customer frequently repurchases,” Tang says.
As more retailers look to retain and increase both local and overseas customers through loyalty programmes, data collection across sales points can help build a suitable model.