Wednesday 8 April 2009
Hong Kong shoppers drive change
According to the Hong Kong Tourism Board, mainland visitors accounted for 57.1 per cent of travellers to the city last year and almost all of these visitors - some 9.6 million - arrived under the scheme. The data clearly indicates that mainland visitors and in particular the scheme are the main contributors to Hong Kong’s tourism business.
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Hong Kong shoppers drive change
Helen Mak
8 April 2009
China’s individual visit scheme allows travellers from the mainland to visit Hong Kong and Macau on an individual basis as opposed to previously restricted visits on business visas or in groups.
It was introduced on July 28, 2003 and the relaxation applied initially to residents of the four Guangdong cities of Dongguan, Foshan, Jiangmen and Zhongshan. But the scheme has since been expanded to cover 49 cities across China, and for Hong Kong the result has been a surge in mainland visitors.
According to the Hong Kong Tourism Board, mainland visitors accounted for 57.1 per cent of travellers to the city last year and almost all of these visitors - some 9.6 million - arrived under the scheme. The data clearly indicates that mainland visitors and in particular the scheme are the main contributors to Hong Kong’s tourism business.
Retail markets benefit from this growth in mainland visitors for whom shopping constitutes more than 50 per cent of their total expenditure. In view of this trend, many retailers are keen to secure prime locations and expand operations to capture this spending.
Over a span of five years there has been a shift of in-demand locations directed mainly by the shopping behaviour of tourists. In the initial stages of the scheme mainlanders shopped mainly for gold jewellery, cosmetics and branded electronic gadgets. The shopping areas of Sai Yeung Choi Street and Nathan Road in Mong Kok were the most desired locations.
International brands have responded to the importance of Hong Kong as a major tourist destination for mainland visitors, taking the view that a flagship store in the city would provide a drawcard for the China market where wealth and demand for luxury foreign products is increasing.
From 2005, more international labels have opened flagship stores in Queen’s Road Central and Canton Road, which are respectively the main luxury hub for Hong Kong Island and Kowloon.
Now almost every corner shop in Causeway Bay is occupied by a luxury watch boutique and Russell Street has been converted into “Watch Street”. Rentals have risen to reflect the increased attraction and in prime retail locations rents have gone up threefold in five years.
Like most of the world’s favoured travel destinations, prime retail locations are always in demand. Amid the global financial crisis, well-known international brands are still seeing solid demand from mainland visitors. Local brands selling leather goods, fashion and cosmetics are particular favourites.
Retailers are gathering in the prime shopping locations to concentrate their services and are willing to pay premium rentals to secure a shop in the recognised tourist landmarks as there is a guarantee of doing business. Furthermore, some retailers consider that if they are seen close to other better known labels, the synergy will help elevate their brand image and take them into the mainstream market.
Prime shopping locations are always the best and most reliable places for visitors to shop. Most visitors do not discover the second-tier shopping areas until they have visited the city several times and have the confidence to roam.
International labels seldom open stores in second-tier areas where market demographics may not be aligned with the image the brand is trying to achieve.
This has resulted in an increased diversification in the retail property sector in Hong Kong. The demand for prime retail locations has expanded enormously while the demand for shop spaces in the second-tier areas has declined.
Second-tier areas do not benefit from the tourism spending but they rely on the support of the local market. However, with the continuing negative effect of the slowing economy and the edging up of the unemployment rate, vacancy rates of retail shops in the second-tier areas are expected to increase further.
In the next few years, new supply in prime shopping locations will remain low. However, owing to some infrastructural redevelopment projects in some districts it is anticipated that there will be a shift of focus in prime retail areas.
For example, Mody Road was once acknowledged as the first developed commercial district in Tsim Sha Tsui during the 1970s. The street attracted high-end jewellers, tailors and shops with merchandise targeted at tourists.
Then the focus gradually shifted to Nathan Road and in the ‘80s there was a pure retail development completed on Nathan Road - Park Lane Shoppers Boulevard.
About 10 years ago Canton Road became a hub for local brands and a mix of trade. But now most of the top international labels are there.
When new grand-scale shopping facilities are completed in an old neighbourhood, it can breathe new life into the area. They provide a new retail configuration, attract retailers and help to reposition the area into a new shopping destination.
Portland Street is a good example. It is a block behind Nathan Road, and was a run-down and seedy area for locals. After the completion of Langham Place, the street has been transformed into a prime shopping location for locals and tourists alike.
The outlook of the second-tier areas is not all that grim. All it takes is a shift in retail focus or a chance for new shopping developments to strengthen its retail infrastructure to rebuild its prime position.
Helen Mak is director of Retail Services, Colliers International Hong Kong
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