By Jonathan Chan and Kate Lin

(Photo by Apple Daily 蘋果日報)


The main source of income for Hong Kong’s retail business comes from mainland tourists, but with their numbers dwindling, retailers that expanded to cater their shopping needs have taken a huge blow.

Amid sluggish retail in the territory, nearly every retailer has been hit hard. Last week, international leather makers Prada, MiuMiu and Gucci slashed as much as half the price for some of their luxury goods. Meanwhile, local businesses such as Bauhaus International (0483), Sa Sa International (017) and i.t. (0999) have also recorded a negative same-stores sales growth, reflected by their plummeted earnings.

But the chill wind blows even more fiercely through the jewellery/watches/optical products market. Local jewellery giant Chow Tai Fook Jewellery (1929) announced their first ever profit warning for this interim since its listing. It finally came out the results with a 42 % tumble in net profit. Sales of such products which are highly dependent on tourists, took the biggest hit. It dropped 22.9% from last year while the overall retail sales staged the sharpest monthly decline in 2015, down 6.4% to HK$35.2 billion. This was followed by falls of 12.3% for clothing, 7.7% for electrical goods and photographic equipment.



However, experts have warned that the worst is yet to come as the weakened consumption sentiment is not likely to hit rock bottom and to recover in the near time. A substantial pick up will not come until next summer as well.

The main reasons behind this include over-reliance on mainland tourists, high rent in the past decade and China’s economic slowdown.

The data map shows that over 40 million tourist arrivals in the first three quarters of 2015 were from China, significantly more than any other country. Based on the 2014 Mainland Consumers Data, it can be seen that over 90% of mainland tourists come to Hong Kong to shop and most of them shop for clothing and beauty products. The total visitor arrivals in August slipped 6.6% from a year earlier, more than the decline of 2.9% in July.

To cater for this, a breakdown of shop categories in some of the most popular malls in Hong Kong indicate that over one-third of the shops are fashion and accessory shops while beauty and cosmetic shops trail behind with almost half the amount. Calvin Klein for example, has 39 shops in the 28 malls, averaging more than one shop per mall.

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Compared to 2011, the consumption patterns of mainland tourists have stayed relatively the same. But as the number of mainland tourists dropped, retail figures in their favored shop category suffered a free fall as well, highlighting a correlation between the two.


Four years ago, when the tourism was in the golden age, many well-off mainlanders visited and shopped in Hong Kong. The rental level therefore skyrocketed with some of the heavy-pocket retailers, mostly the jewelers, splashed billions of dollars for renting street shops in Causeway Bay, notably Russell Street and Percival Street. Meanwhile, retail market was blossoming. Cosmetic chain Sa Sa and jewelry seller Chow Tai Fook ranked top to benefit. All the retailers have been heading the south afterwards. Although some retailers did find a way to fight back, like Dickson Concept (0113), the recovery is still not resilient enough to drive them back to the ‘golden age’.


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But, China sees a slowing economy now, at the same time, the authorities have been advocating anti-corruption and anti-extravagance political claim. Chinese are more reluctant to consume or spend on luxury goods, reflected from the declining trend of total inbound retail sales in the SAR. Early stock market routs might be a lightweight dragging force but the transformation of China’s economy would be a huge one.


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The SAR, branded “the shopping paradise” has been counting heavily on mainland tourists, who consume the most luxurious products offered by local vendors. But as mainland tourists withdraw from shopping in Hong Kong, shops catered for them have only suffered devastating blows.