Hong Kong retailers amp up online sales capacity

However, the online penetration rates in the area still have ample room to grow.

Hong Kong retailers are responding to the COVID-19 era by increasing investment in online sales capacity and consolidating brick-and-mortar store networks, according to CBRE Research’s latest Asia Pacific Retail Flash Survey.

During Q1 2020, most major APAC retail markets, including Hong Kong SAR, recorded a contraction in retail sales, and 87% of APAC survey respondents identified loss of sales as their top concern. To support long-term business growth, 78% of them plan to invest more in online retailing and delivery apps and 80% said they will boost their social commerce capacity.

“More retailers have shifted to digital sales channels to sustain their businesses during this period. The online penetration rates in Hong Kong remain relatively low and have ample room to grow compared to other APAC markets such as Mainland China and Korea,” said Ada Choi, head of occupier research in APAC and head of research in Greater China at CBRE.

The role of digital sales channels has significantly and rapidly changed in retail business in the past few months. 31% of the APAC respondents now view online sales as their core business, compared to 9% before the outbreak of the pandemic.

The pace of digital transformation in the retail sector is expected to accelerate, with social commerce set to take on a more prominent role, CBRE said. Whilst the consolidation of brick-and-mortar sales networks is inevitable, 75% of APAC respondents still intend to increase or maintain investments in in-store experiences.

The survey results also noted that whilst the regional luxury market is expected to remain challenging, industries like grocery, health and beauty and lifestyle hold a more optimistic view about the future, with more than half of them expecting sales to return to pre-pandemic levels within the next six months.

Overall, 61% of APAC respondents expect it will take at least six months to return to pre-pandemic levels after business resumes. Where landlords’ response to relief measures are concerned, all respondents from Hong Kong said they have been offered some relief measures by landlords. Nevertheless, these respondents would like landlords to be more accommodative with regards to the relief measures.

“Apart from negotiating rental discounts, landlords typically provide marketing support, such as shopping promotion campaigns, CRM programs, parking discounts, to support tenants and attract local customers. The local consumer spending power still has ammunition. Whilst retail footfall is recovering as the outbreak is contained, customers are usually incentivised to spend with appropriate marketing efforts,” commented Lawrence Wan, senior director of advisory & transaction services–retail at CBRE Hong Kong.

Wan also added that the demand for healthcare, education and daily groceries remained stable in Hong Kong and that a number of international brands and retailers are looking for the right time to enter the market, considering the increased availability of prime spots, lower rents and reduced operational costs. “We may see more new retailers branching out to Hong Kong in H2 2020 or early 2021,” added Wan.