11th July 2024 – (Hong Kong) A troubling economic narrative is unfolding. Hong Kong’s retail sector, long considered a cornerstone of the city’s economy, is grappling with a crisis of unprecedented proportions. Recent data paints a grim picture, with retail sales plummeting by 11.5% in May compared to the previous year, marking the second consecutive month of double-digit declines. Industry insiders project an even steeper drop of 15% for June, leaving many to wonder if the sector has hit rock bottom.

The magnitude of the retail downturn is stark. May’s retail sales, provisionally estimated at HK$30.5 billion, represent a significant contraction from the same period last year. This follows an even more dramatic 14.7% year-on-year decline in April. The Hong Kong Retail Management Association’s recent survey of 4,200 shops revealed that a staggering 85% of respondents reported a drop in business compared to the previous year.

These figures are not mere statistics; they represent the livelihoods of thousands of Hong Kong residents and the vitality of entire neighbourhoods. From the glitzy shopping districts of Causeway Bay to the local markets in Mong Kok, the impact is palpable. Vacant storefronts are becoming an increasingly common sight, with some streets seeing occupancy rates drop to alarming levels.

A member of the Legislative Council representing the accounting sector highlighted the severity of the situation: “If one street has 50 shops and 10 are vacant, there might still be investors willing to take a chance. But if only half the shops are open, no one will invest.” This stark assessment underscores the urgency of the situation and the need for decisive action.

In the face of this retail crisis, the Hong Kong government’s response has been tepid at best. While officials continue to tout the potential of mainland Chinese tourists as economic saviours and promote a calendar of over 200 events expected to generate HK$7.2 billion in consumption, the reality on the ground tells a different story.

Critics argue that the government’s approach is out of touch with the realities facing small and medium-sized enterprises (SMEs) in non-tourist areas. The reliance on mainland visitors and grand events fails to address the fundamental shifts in consumer behaviour, particularly the trend of Hong Kong residents crossing the border for cheaper goods and services.

Moreover, the government’s claims of new business openings outpacing closures – “for every 10 shops that close, 16 new ones open” – have been met with scepticism. Industry insiders argue that this statistic fails to capture the true state of the retail landscape, where long-established businesses are being replaced by short-lived ventures or budget-friendly chains that do little to enhance the city’s retail diversity.

As traditional approaches falter, there is a growing chorus of voices calling for more innovative solutions to revitalize Hong Kong’s retail sector. One promising avenue is the support and promotion of local food culture, particularly through fixed-pitch and itinerant hawker stalls.

Dr. Emily Wong, an urban planning expert argues, “Hong Kong’s street food culture is not just a tourist attraction; it’s a vital part of our city’s identity and economy. By supporting and modernising our hawker stalls, we can create unique experiences that cater to both locals and visitors.”

This approach aligns with the government’s stated goal of promoting “tourism everywhere” in Hong Kong. However, current policies and regulations often hinder rather than help the development of a vibrant street food scene. The number of licensed hawkers has been steadily declining, with only a handful of new licenses issued in recent years.

Another untapped opportunity lies in Hong Kong’s countryside areas. With the increasing popularity of hiking and outdoor activities, there’s a growing demand for diverse culinary options beyond the basic refreshment kiosks currently available in country parks.

James Chen, a tourism industry consultant, suggests, “We should be looking at ways to allow carefully regulated food stalls or small restaurants near popular hiking trails. This could create new business opportunities while enhancing the overall visitor experience.”

Such initiatives could not only provide a boost to the retail and F&B sectors but also help distribute tourist spending more evenly across the territory, alleviating pressure on traditional shopping districts.

Addressing Hong Kong’s retail crisis demands a comprehensive strategy that encompasses more than just anticipating the return of mainland tourists or increasing event frequency. The government should undertake detailed surveys to gauge the actual condition of retail sectors, particularly those outside tourist hubs. Additionally, it should simplify regulations to facilitate the growth of local food hawkers and street markets, while also seeking creative methods to improve culinary experiences in rural regions. Targeted assistance should be provided to small and medium-sized enterprises (SMEs) to aid their transformation and digitalization efforts. Finally, a reevaluation of urban planning strategies is necessary to foster diverse and dynamic retail environments.

Dr. Wong emphasises, “We need to move beyond the ‘big box’ retail model and create spaces that reflect Hong Kong’s unique character. This means supporting local businesses, preserving traditional markets, and integrating retail experiences with our city’s cultural heritage.”

Hong Kong’s retail sector stands at a crossroads. The current crisis presents not just challenges but also opportunities for reinvention. By embracing innovation, supporting local culture, and adopting a more holistic approach to urban development, Hong Kong can revitalise its retail landscape and create experiences that resonate with both residents and visitors.