Rapaport Magazine

Hong Kong

By Mary Kavanagh
Steep Decline

Retail sales for the first half of 2016 fell 10.5 percent — the biggest decline in 17 years. Although it was unlikely that the ongoing downward spiral of retail sales in Hong Kong would turn around during the typically quiet summer months, the dismal June figures gave little reason for optimism for the rest of the year. Overall, retail sales in June fell 8.9 percent in value and 9.6 percent in volume year on year. Sales in the jewelry, watches and clocks and valuable items category declined 20.4 percent compared to June 2015. The Hong Kong Retail Management Association (HKRMA) did not foresee a significant change in the near future. “Most of the member companies anticipate the downward trend to continue but slow down in the remaining year 2016, taking into account a lower base recorded in the second half of 2015,” HKRMA said in a statement.
   Haywards of Hong Kong, a bespoke jeweler specializing in engagement rings and diamond jewelry, experienced both good and bad months year-to-date, although overall business performance was similar to 2015, according to David Nazer, managing director. “I think we are bucking the trend from the high-street experience,” he said. “I understand that all the big retailers have been closing stores and some of the smaller well-established chains like Larry’s, too,” he added. “We have had to increasingly come up with new and inventive ways of marketing ourselves. We have found that in this increasingly competitive market, our focus on service as much as product has been very attractive, especially as we start to make more inroads into the local and Mainland markets.” Haywards has traditionally focused on the expatriate market in Hong Kong, but has recently experienced increased interest from customers from the Mainland.

Visitor Dependency
   A government spokesman attributed the declining retail numbers to “the fall in visitor spending and the more cautious consumer sentiment amid subpar economic conditions,” yet pointed out that “on a seasonally adjusted basis, retail sales improved moderately in the second quarter compared to the first quarter.” He also noted that short-term retail sales performance would continue to be dependent on inbound tourism and consumer sentiment.
   Many companies that geared up their operations to cater to the visiting Mainland customers are now having to wind back down, Nazer said. “We’ve seen a couple of well-established suppliers downsize their operations both in terms of numbers of staff and moving to smaller offices in recent months. For a number of years, the industry has been waiting for a return to the high volumes of Mainland customers to Hong Kong and now there seems to be an acceptance it’s not going to happen any time soon,” he added.
   On a more positive note, the number of visitors to Hong Kong in July was up for the first time in 13 months, with overall arrivals increasing by 5.3 percent over the same period in 2015, with those from Mainland China up by 2.2 percent. Chairman of the Hong Kong Tourism Board (HKTB) Peter Lam Kin-ngok was hopeful that this positive trend would persist for the remainder of the year, although he noted that visitors from the Mainland are spending less than previously. Currencies have appreciated in Europe and Japan, destinations that were attractive to Mainland tourists earlier this year and some analysts predict that this will draw tourists back to Hong Kong.

Plentiful Supply
   Levels of stock in Hong Kong are good according to Nazar. “We are finding it easy to source our target range of diamonds and we are being barraged by new suppliers keen for us to take stock,” he said. Haywards does not exhibit at the September Hong Kong Jewellery & Gem Fair, but does attend to source stones. “None of our suppliers that exhibit are particularly excited or optimistic,” Nazer said. “They are still relying on selling direct to the public, which hurts the local retail market.” The September show will give a good indication of what is to come in the fourth quarter, especially as the Christmas season also kicks in that month. “We have already developed a great new ready-to-wear collection with an emphasis on big looks but inexpensive styles,” Nazer concluded. “We are optimistic for another good winter season because we are still very strong with the expat market.”

Article from the Rapaport Magazine - September 2016. To subscribe click here.

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