Date
24 July 2017
Cross-border e-commerce offers a way out for Hong Kong's retailers who have been facing various headwinds. Photo: Bloomberg
Cross-border e-commerce offers a way out for Hong Kong's retailers who have been facing various headwinds. Photo: Bloomberg

How small HK retailers can survive the sales slowdown

Hong Kong’s retail sector has been buffeted by several headwinds in recent months.

China’s economic slowdown, weaker renminbi, import duty cuts on the mainland, President Xi Jinping’s anti-graft campaign and travel curbs on Shenzhen residents have all led to a significant slowdown in retail sales in the territory.

While there are many factors behind the changed fortunes of Hong Kong’s retailers, the hostility displayed by locals toward mainland visitors may be considered to have had the most devastating impact, Professor Wong Kam-fai from the Chinese University of Hong Kong wrote in the Hong Kong Economic Journal.

“When Japan, South Korea, England and the US are all wooing mainland shoppers with open arms, why would the Chinese want to splash out in Hong Kong and risk getting yelled at or discriminated against?”

While sales are falling, cost cutting is proving difficult for retailers given the high store rental costs and employee wages, Wong wrote.

Meanwhile, fewer youngsters are now willing to join the industry because of long working hours, he noted.

Some experts believe that small and medium-sized retailers in particular face tremendous pressure, and that the firms have to transform their business models or perish.

In Wong’s view, cross border e-commerce is the way to go.

Quality assurance remains a key draw of Hong Kong. Mainland shoppers are still keen to buy things from Hong Kong, but fewer people are now willing to come to the city in person. E-shopping will solve this problem.

Since 2013, the mainland government has been adopting policies that promote cross border e-commerce in free trade zones, with simple and low tax regime (around 10 percent) being the biggest attraction.

Using this channel, Hong Kong retailers can tap mainland demand for things ranging from health care goods to infant formula, while cutting back on manpower or even getting rid of their costly brick and mortar shops, Wong wrote.

– Contact us at english@hkej.com

RC

EJ Insight writer

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