Online buying poised for HK expansion

money-glitz | 26 Feb 2018

Samantha Wong

The growth of e-commerce is inevitable in Hong Kong, as the younger demographic has a different purchasing habit compared with the older generation, says Pascal Martin, a partner in OC&C Strategy Consultants.

"Shopping is very easy and convenient in offline stores because there are plenty of them in the city, close to everyone's home," says Martin. But, he adds, the younger demographic is also buying online, with the most popular sites worldwide such as Amazon.com, ASOS.com and Taobao.

Although Hong Kong has a dense physical retail environment, its revenue in the e-commerce market is forecast to grow at an annual rate of 9.8 percent until 2022, Martin says.

Currently, the average revenue per user in the city is US$928 (HK$10,111), slightly lower compared with US$1,114 in Singapore, US$1,250 in Japan, and HK$1,495 in South Korea.

E-commerce penetration is expected to reach almost 50 percent of the world's population this year, data from marketing company Statista shows. One of the areas with the most growth potential globally is Asia Pacific, Martin says.

A global ranking of e-commerce penetration by country shows the United Kingdom, Germany and South Korea are leading the pack, each with over 70 percent of the population having bought a product online during the previous month.

Demand for logistics space in Hong Kong is expected to improve compared with 2017, led by e-commerce and related operators, a CBRE report shows, adding that increased online spending and overseas will also continue to negatively impact local consumption.

Martin forecasts that the surge in retail rents will slow down due to the increasing popularity of e-commerce.

According to a recent online shopping survey by Mastercard, although more than three quarters regarded security of payment facility as a key consideration when shopping online, 44.3 percent of local consumers made a purchase via their mobile phones, up from 38.2 percent in 2014 when the survey was first launched.

Convenience (54.6 percent) continues to be the key driver for mobile shopping, followed by the growing prevalence of apps (41.8 percent) that make it easier to shop and the ability to shop on the go (25.7 percent).

Meanwhile, Amazon and Zalora, two of the most popular online retail sites in Asia, are not present in Hong Kong but the small market of Singapore, which is comparable to the market size of Hong Kong. Martin explains that these global players see Singapore as a gateway to Southeast Asia.

"As a matter of fact, if you add Singapore, Indonesia, Malaysia, this is already a US$5.9 billion e-commerce market, more than three-times of the size of the Hong Kong e-commerce market," he says.

And if you add Thailand, Vietnam and the Philippines to this group, it is a US$9.1 billion e-commerce market well worth investing in, he adds.

"Now, the Southeast Asia picture appears even more attractive if you look five years down the road, at 2022 e-commerce market size projections will reach US$30 billion," he says.



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