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Hong Kong retailers: discount or die

Apr 7, 2016


No longer riding the wave as the first port of call for Chinese tourists, Hong Kong retailers need to discount or die.

That’s the blunt warning from MarketWatch columnist Craig Stephen, who says Hong Kong’s recovery depends in part on “downward price adjustments”.

He says commercial property prices should be more flexible than residential, because while residents may have little choice but to pay the highest price for property in the world, tourists and retailers can go elsewhere.

“Perhaps the biggest change is busting the myth that Hong Kong is some sort of shoppers’ paradise,” writes Stephen. “Now mainland shoppers know what most Hong Kong people have known for years — there are few real shopping bargains to be had.

“Any pretense that Hong Kong offers competitive shopping has been undermined by its accumulative sky-high retail rents, which have inevitably fed through to prices. It is also fairly easy to go online and calculate that price savings mean the cost of an airfare can be quickly recouped.”

Visitors from China to Hong Kong – once the first and most convenient stop for mainlanders going overseas – tumbled by more than a quarter in February. Hong Kong also attracted international brands, with the government promising new bridges and high-speed rail links to bring even more shoppers across the border.

But with the dramatic fall in tourist arrivals from the mainland, retail sales have followed suit, dropping 21 per cent in February from the same month a year earlier – the biggest decline in 17 years.

Stephen says the problem for the city-state is its geographical location and the fact it built its reputation on a comparative advantage in shopping alone. Chinese tourists now have more choices, with many countries introducing visa-friendly policies and overseas flight options expanding dramatically.

“While Hong Kong can try to diversify its limited tourism attractions, the reality is that a large chunk of the 45 million-plus visitors from across the border went there because shopping was cheaper. It will likely take a price cut for them to return.”

Source: Inside Retail Asia

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