HONG KONG: Hong Kong's retailers are battling against shifting consumer habits, as visitors spend less and locals head across the border to China for cheaper dining and shopping, leading to a wave of store closures.
A 36-year-old Chinese seafood restaurant chain and a popular high-end food court in the bustling Causeway Bay district closed this week.
Other recent closures in the financial hub include cinema chains, a major catering group, a 41-year-old bakery and a three-decade-old congee chain.
Weak domestic spending and cheaper prices in Shenzhen, bordering Hong Kong, have compounded retailers' woes, according to industry figures and analysts.
Furthermore, China's economic slowdown, US-China geopolitical tensions and a national security clampdown have also weighed on business sentiment and hurt Hong Kong's small and open economy.
The city's GDP is forecast to grow between 2%-3% this year, compared with 2.5% last year and 3.2% in 2023.
"The change in consumption patterns is irreversible," said Annie Yau Tse, chairwoman of Hong Kong's Retail Management Association.
Hong Kong was once a prime destination for high-spending mainland visitors but mass anti-government protests in 2019 and Covid restrictions led to a decline in its appeal.
The authorities have launched initiatives to revive tourism, including hosting large-scale events such as Coldplay concerts and a Manchester United exhibition match at a new harbourside stadium.
While visitors are returning to near 2018 levels with May arrivals up 20% to 4.08 million visitors versus 4.95 million in 2018, spending remains soft.
Retail sales by value rose 2.4% in May from a year earlier to HK$31.3 billion (US$4 billion), the first rise in 14 months, government data showed on Wednesday. However, it remains only around 77% of the HK$40.5 billion in May 2018.
"We are trying hard to think of ways to turn the traffic into business," Yau Tse said.
Jack Tong, director of Savills Research & Consultancy, said the recent string of closures was due to a "structural shift in the local retail market" starting from 2023.
It is "no longer strong enough to support such retail trades and would be beyond repair even by further reducing rents."
Overall prime street rents in the first quarter have fallen back to 2003 levels, he said.
"The rise in local outbound travel in Hong Kong and changes in mainland tourists' spending patterns and preferences in Hong Kong and Macau continued to weigh on the overall retail sector during the financial year," jeweller Chow Tai Fook said.
Last month, Cafe de Coral reported a 29.6% drop in net profit for the 2024/25 year ended in March, citing a weak economy and consumer sentiment.
Despite the tough conditions, some signs of recovery are emerging.
Vipul Sutariya, who attended the jewellery fair in June, said Chinese dealers were back at the fair "not to buy immediately but to ask, which is the biggest change in the past 1.5 years," he said. "In my view that's a good sign." - Reuters
