HK retail sales predicted to fall by 3pc to HK$470b

Business | 1 Feb 2019 4:16 pm

Retail sales in Hong Kong will shrink by 3 percent to HK$470 billion this year, a professional services firm predicted today.

PricewaterhouseCoopers says the retail sector grew strongly last year. Total retail sales gained by 8.8 percent for the whole year to HK$485 billion, the highest level since 2013 and the third highest on record. However, growth did slow down significantly towards the end of last year, as market turbulence and a weak yuan against the backdrop of an escalating Sino-US trade war put a damper on consumer confidence and actual spending.

This year, China's newly introduced e-commerce law also looms over big retailers, who are taking a cautious view in assessing its impact on sales in the short-medium run.

Michael Cheng, PwC's Asia Pacific and Hong Kong/China Consumer Markets Leader says, total retail sales are forecast to drop by 3 percent to about HK$470 billion in 2019.

Traditionally strong sectors such as luxury and electrical goods stand to bear the brunt, PwC says.

In particular, the recent rebound in gold prices will slow down the demand for jewelry and watches, and hence lower the sales of luxury products.

In addition, the Year of The Pig is also considered as a "blind year,'' or an undesirable year for marriage according to Chinese traditions. And might have an unfavorable impact on the demand for gold products, but might not to a huge extent thanks to new purchasing habits and lifestyles of younger generations.

On the other hand, fast-moving consumer goods categories including medicines and cosmetics; food, alcoholic drinks and tobacco; and supermarkets are expected to enjoy a steady and healthy growth, PwC says.

Jenny Tsao, South China and Hong Kong Consumer Markets Tax Leader at PwC Hong Kong, says, 2019 would be a tough year for many suppliers with manufacturing base in China, as a lot of US retailers have pushed to complete more orders before the end of 2018 and stock up merchandise to meet coming demands in 2019, meaning there may be fewer orders for 2019. Electronics, food and household goods are among the multitude of sectors that would suffer from a drop in business in light of the anticipated tariff increase to 25 percent in March?.

China's new e-commerce law that came into force on 1 January 2019 is also set to affect the "daigou'' market, which is seen to have contributed considerably towards categories including shopping malls, beauty and healthcare, PwC says. E-Commerce platform players will try to ensure that retailers that are selling through their platforms are adhering to the new requirements under the new law.

As the new requirements strictly prohibit redistribution activities undertaken by "daigou'' traders, it may affect them severely to the extent that they might be forced to leave this business. In addition, it would further impact the business where "daigou'' traders source their products from.

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