Thursday, 5 June 2014

Keep Shopping, Please!

There aren't as many frenzied scenes like this due to the drop in China visitors
The big news yesterday other than the 25th anniversary of June 4 is that Hong Kong's retail sales in April plunged 9.8 percent year-on-year to HK$38.8 billion, or 9.6 percent in volume, according to the Census and Statistics Department.

It's the third consecutive month figures have dropped, after a 1.3 percent in March and 2.3 percent in February.

This coincides with a decline in the growth rate of mainland visitors was 14.6 percent in April, from 26.7 percent in March.

Some analysts say the drop is due to the anti-corruption campaign in China, with people buying fewer luxury gifts for officials. Expensive items like jewellery and watches saw sales plunge almost 40 percent in April.

However sales in consumer durables were down by one-fifth, and for electronics and photographic equipment decreased slightly by 8.3 percent.

Mr Gloom Financial Secretary John Tsang Chun-wah said, "The drop is the biggest since February 2009. If the decline persists, it could affect the economy and the employment situation."

Terence Chong Tai-leung, an executive director of Chinese University's Institute of Global Economics and Finance said, "Tourists' spending patterns have changed. It will be hard to revert to the old days when they splurged on luxurious products."

However Secretary for Financial Services and the Treasury Professor Chan Ka-keung put things into perspective. "If you talk about the decrease in sales of luxury goods, I think it may have to do more with the slowdown of the mainland economy and the change in consumption habits of high-income mainland tourists, rather than to changes in the number of mainland arrivals. It has to do more with the macro environment."

So what now? How can Hong Kong keep up with this drastic change in mainland consumer habits here?

First off -- mainlanders continue to shop here because of the extensive selection of brands, the convenience of shopping here as well as tax-free -- but buying less. In other words they are buying more for themselves and friends than to curry favours. This will lead to the pursuit of more unique items, particularly one-of-a-kind pieces for the uber rich.

So luxury brands don't have to panic yet -- but just don't expect Ms Wang to buy 10 LV bags because she will probably only buy two, but two nice ones.

Then there's the fact that there are underlying tensions between mainlanders and locals doesn't help the situation -- if the Hong Kong government had done more to bridge the gap and politely addressed visitors on do's and don't's here that may have helped encourage warmer hospitality from locals would who would probably more willingly return.

Finally the Hong Kong government needs to rethink its tourism strategy for the mainland market. Do we need all these shopping malls just catering to them? Eventually they are going to do want to do more than just buy things and yet Hong Kong is only focused on chasing the short-term gains.

Or is it because they have no other brilliant ideas up their sleeve?

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