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Hong Kong
By Mary Kavanagh
Retail sales in January declined for the eleventh consecutive month, with the jewelry, watches and clocks and valuable gifts category recording a drop of 16.3 percent in value and 9.6 percent in volume compared to the same month in 2015. Overall sales dropped by 6.5 percent in value and 5.2 percent in volume. A government spokesman said the fall reflected a “protracted slowdown in inbound tourism and also weakening local consumption sentiment amid the uncertain economic outlook.” The spokesman also emphasized that the retail sales figures for January may be somewhat affected by the difference in timing of the Lunar New Year, which fell on February 8 this year, but on February 19 last year. Thomson Cheng, chairman of the Hong Kong Retail Management Association (HKRMA), which represents more than 7,800 retail outlets in the city, said he feared the result for February would be far worse than January, as the usual rise in sales powered by pre-Lunar New Year holiday spending was over. “The February figure will be very unsatisfactory,” Cheng said. “Some of our members even felt the market had collapsed. Everyone is worried.” Hong Kong conglomerate Wharf reported that retail sales at two of its major malls, Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay, fell 12 percent in 2015 over the year before, and that sales continued to fall this year, with a 12 percent decline in January over the previous year.
Simon Zion, Dehres, diamond jewelry manufacturers, said the trend has been downward for quite some time. “We look at it as a five-year slow, steady decline since 2011. There have been ups and downs every year, but the general trend has been downwards,” he added, noting they are hoping that the top tier will come back and people will invest in diamonds and colored gemstones again. Industry members are generally uncertain as to when the market will turn around, but agree that business is more challenging than previously. Payal Shah, owner and founder of L’Dezen, jewelry manufacturer, said, “Business is not as great as it used to be.” As a result, she is diversifying her offerings by creating the same items in a variety of different materials. Shah started out by focusing on products using sliced diamonds. “My price range is the same, but I now have more designs available at the lower end from $1,000 to $3,000,” she said adding that these goods are easier to move and more likely to be bought on impulse at jewelry shows or in her showroom than the higher-end goods. Vinnie Yiu, Brilliant Trading Company Ltd. (BTC), also acknowledged that business has been very tough in Hong Kong and on the Mainland, observing that the large listed retail chains have all reported significant decreases in sales. “Other, smaller guys are having an even tougher time,” he said, pointing out the need for changes to attract back local Hong Kong shoppers and visitors from the Mainland. BTC will most likely shift its focus somewhat to manufacturing goods not only for Chinese customers, but for the broader Asian market, Yiu said.
In spite of the tough retail environment in Hong Kong, Lawrence Ma, founding president and chairman of the Diamond Federation of Hong Kong (DFHK) and chief executive officer (CEO) of the Lee Heng Diamond Group, remains positive about Hong Kong as a place for those in the diamond industry to do business. “I think Hong Kong is a wonderful platform and center for the diamond jewelry industry,” he said at the March 2016 Hong Kong International Diamond, Gem & Pearl Show and Hong Kong International Jewellery Show. “In Hong Kong, we have a huge supply of diamond polishers and many manufacturers and retail stores all around the city. Hong Kong is a free port so we can ship goods in and out without duty. We have a very efficient transportation system and a great banking system, so everything can be done out of Hong Kong. We can ship goods to anywhere in the world within 24 hours,” he added, highlighting the access to hundreds of diamond jewelry manufacturers just across the border in China. (For more about the Hong Kong show see Hong Kong Shows Compete for Business in the Shows section).
Hong Kong is undoubtedly well situated for those in the diamond industry, yet business is still dependent on visitors from the Mainland, who are now traveling further afield to spend their money, and on the global economy, which has been challenged on many fronts in recent months. According to a government spokesman, “The near-term outlook for retail sales will remain constrained by the sluggishness in inbound tourism. External uncertainties, including the dimmer global economic outlook and the U.S. interest rate normalization, may add further headwinds.” It remains to be seen how soon the market can reverse the downward trend.Article from the Rapaport Magazine - April 2016. To subscribe click here.
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