Retail Roundup

Retail Roundup

The retail sector of Hong Kong had a tough 2016, but generally bounced back in 2017. In 2018 and beyond, analysts are expecting better growth. In a recent retail round table by PWC Hong Kong, the accounting firm went over a number of their forecasts for the retail sector. From a macro point of view the firm noted that, “retail sales may return to [their] peak of HK $494.4B by 2020.

One of the bullish catalysis that can promote sales back to their 2013 highs is the loosening of the ‘one-trip-per-week” cap on visits to Hong Kong. Removing or loosening the cap on incoming tourists would certainly benefit small businesses and brick and mortar operations. When the cap was originally enacted back in 2015, in-part aimed to clamp down on cross board retail trade arbitrage (buying goods in HK to flip them back in the mainland), tourist inflows from some mainland cities dropped by 30%.

Regardless of any policy change, PWC notes that retail sales will likely grow 6-7% in 2018, to HK $480B. Part of this growth is being driven by technology. PWC ran a survey that concluded 40% of Hong Kongers buy goods at least monthly from their mobile device, but also noted that 35% believe mobile websites aren’t easy to use. Removing any friction from the buying process is the goal of companies like Alibaba, Tmall and Amazon. But it’s not all about online sales for companies like Alibaba.

Jack Ma’s company has recently been snapping up brick and mortar stores. Forbes estimates that Alibaba has invested over $8 billion in supermarkets, malls and other physical locations. Back stateside, online giant Amazon just recently closed its own brick and mortar deal – acquiring Whole Foods for just under $14B USD. Recent data indicates current strategies are working, with retail sales expanding 3.6% YoY in Hong Kong for the latest period (October 2017).

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