Rapaport Magazine

Hong Kong

By Mary Kavanagh
No End In Sight to Purchasing Decline

Half a billion Chinese tourists traveled abroad during China’s National Day “Golden Week” holiday from October 1 to 7, but Hong Kong and Macau were not on the list of top destinations. According to the China National Tourism Administration (CNTA), 9,355 Mainland tourists visited Hong Kong over this period, 55.7 percent less than the same time in 2015. The number of visitors to Macau fell almost 62 percent to 2,338 during this time frame, with far-flung destinations such as Russia, the U.S., Morocco, Tunisia and Tonga proving to be popular, in addition to other Asian countries. More Chinese tourists than ever before traveled to the U.S. to celebrate Golden Week, with bookings up 8.1 percent from late September to the last day of the holiday on October 7, a travel industry analysis firm reported.
   Golden Week is a major holiday in China and typically a time when consumers spend more money than usual on consumer products such as household appliances, mobile phones, jewelry, clothing and cars. Lau Hak-bun, director of Greater China at Chow Sang Sang, one of Hong Kong’s largest jewelry retail chains, said the number of visitors on the first day of Golden Week was similar to an ordinary weekend, the South China Morning Post reported. Lau also said he expected sales to drop 10 percent during the seven-day holiday period compared to 2015.
   Retail sales in Mainland China rose at a low double-digit pace, 10.7 percent, during the weeklong National Day holiday, according to data from the Ministry of Commerce. Yet growth slowed slightly compared with last year, at 11 percent.

Happy Holiday Season?
   Those in the diamond jewelry industry across the city continue to struggle and there is little evidence to support a recovery coming into the Christmas holiday period. “We expect that the operational environment in Hong Kong will remain challenging,” a spokesperson for Chow Tai Fook said, adding that they do not release sales figures for the October Golden Week. “We’ve started consolidating our retail network in Hong Kong and Macau and expect to close seven to eight stores during fiscal year 2017, which runs from April 1, 2016, through March 31, 2017, aiming at enhancing store productivity and efficiency,” the spokesperson added.
   Sally Ryder, founder of Ryder Diamonds, a designer and manufacturer specializing in bespoke diamond wedding and engagement jewelry produced on-site in a Hong Kong workshop, said overall, business is not as good as 2015. “We haven’t yet experienced our usual increase in inquires leading up to Christmas. We’re hoping it’s still coming, as we are usually busiest in the months of October and November,” she added. Ryder, whose clients are predominantly from the expatriate community, has also focused on creating a ready-to-wear collection in the past couple of years to cater to last-minute gift-buyers. “Our collection has continued to be quite strong,” she said. “But overall, this year has been down compared to last.” Ryder has recently seen an increase in demand for oval cuts and also emerald cuts, which she put down to “coincidence” rather than a new trend.
   Business has been equally tough on the wholesale front. “Business in general is still slow, but specific demands for large stones are still there,” said Alon Garty, managing director Windiam Asia, a diamond wholesaler.

Continuing Downward Spiral
   Overall retail sales in Hong Kong declined 10.5 percent in value in August and 12.7 percent in volume — the steepest decrease since February — and the eighteenth month of consecutive decline. Sales of jewelry, watches and clocks and valuable items dropped 26.6 percent in value compared to 26.2 percent in July 2016. Thomson Cheng, chairman of the Hong Kong Retail Management Association (HKRMA), attributed the decline to the drop in tourist numbers in August and wasn’t optimistic for a turnaround anytime soon. “A bottoming out is nowhere in sight,” he said, forecasting that retail sales would decline for another year before the sector bottoms out, and correctly forecast that the Golden Week holiday wouldn’t help.
   Most of the HKRMA’s members said they are not optimistic about the sales performance in September and October and forecast a single-digit percentage drop in sales this year. A government spokesman said the numbers reflected “the drag from the decline in visitor arrivals in that month as well as the cautious consumer sentiment amid an uncertain economic outlook.”

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

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