Healthier tourist arrivals boosts struggling retail sector as sales hit $446.1b in 2017

However, if retailers want to stay afloat, they should look for revenue sources other than mainland tourism.

Hong Kong’s battered retail sector is slowly regaining its footing amidst stabilising inbound tourism levels as total retail sales rose marginally by 2.2% in value and 1.9% in volume to hit a provisional estimate of $446.1b in 2017, according to data from the Census and Statistics Department. 

Medicines and cosmetics posted a significant increase at 5.5% followed by jewellery, watches and clocks at 5.2%.

Fuels, commodities in department stores and food, alcoholic drinks and tobacco also performed strongly after posting growth rates of 4%, 3.4% and 3.2% respectively. 

Analysts believe that two year retail slump has made it clear that inbound tourism from the Mainland can no longer form the bulk of the sector’s support. This comes as high-spending Chinese tourists decided to limit consumption amidst Chinese President Xi Jinping’s corruption crackdown which significantly weighed on tourism and retail figures. 

Retailers should therefore direct their energies towards looking for other business sources to achieve a slower but more sustainable growth trajectory and analysts are bullish that the conditions are more than ideal to look for other retail options.

“As the overall rent on major retail streets have been dropped significantly in the last 24 months, so more and more retailers and even F&B operators feel the rental burden become much relieved now and the main concern will be how to tap for new business source when Chinese tourist no longer their main support,” said CBRE HK Executive Director Joe Lin.

“In the future, we believe that we will be seeing more E-sports (online games) relevant trades, Online to Offline retail shops (O2O), the traditional retail operators have to do something to attract their customers to walk away from their computers or mobile phones to try new things and new experience in their brick and mortar shops,” Lin added.