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Retailers embrace in-store experiences and customer engagement in bid to boost market share
Hong Kong shoppers can expect to enjoy greater choice and more personalised, hands-on experiences in 2017, as retailers and landlords seek to draw them into their stores and shopping centres.
"A lot of retailers are enhancing their in-store experiences, including in-house dining, and are embracing pop-up stores to increase brand awareness," says Terence Chan, JLL's Head of Retail, Hong Kong, referencing the sports and 'ath-leisure' sector as a front-runner in this respect.
Adidas' flagship store in Causeway Bay offers free in-store workouts provided by the company's training academy and a training simulation that mimics outdoor weather conditions through a temperature control system. Similarly, Nike's Tsimshatsui flagship offers treadmills for customers to test its running shoes, as well as customised sportswear.
"These initiatives go beyond simply whether the clothes fit the customers, to how the products can improve your performance and meet your fitness goals," explains Shaun McManus, a Negotiator with JLL's F&B and Lifestyle Retail team.
Drone-maker DJI is focusing on customer engagement with its flagship store in Causeway Bay's Tower 535, enabling shoppers to interact with its products through workshops, demonstrations and an in-store flying zone.
Eric Cheng, a Director with JLL's Retail team, predicts that shopping centre landlords will pick up on the tech trend in the months ahead. "We are already seeing mall landlords increasing the percentage of their portfolios catering to lifestyle experiences," he says. "In Bangkok, there is a shopping centre with a full floor dedicated to technology and gadgets, which allows customers to interact with products, and this is a concept that Hong Kong landlords could adopt."
Collaborative pop-up stores across retail sectors are also increasingly common, with a recent partnership between Brazilian flip-flop brand Havaianas and Mexican eatery Brickhouse proving popular in Swire Properties' Pacific Place mall. Pop-up stores in prime malls enable landlords to optimise space and minimise void periods, as well as encouraging repeat visits from consumers seeking a fresh shopping experience.
By 2020, JLL's Foodservice Consulting team forecasts that 80 per cent of retailers will have some form of additional entertainment or unique offerings within their stores. "These kind of in-store experiences can really build brand loyalty over the long term," adds Chan.
With preliminary figures suggesting that Hong Kong's high street shop rents fell more than 18 per cent in 2016, JLL believes landlords should embrace experiential retail and broaden their horizons regarding the kind of retailers they will consider as tenants in the year ahead.
"The market is moving away from demand generated by tourist spending, particularly mainland Chinese tourist spending, to a situation where local shoppers and local consumption is driving demand," he explains. "Landlords need to be flexible with their rental rates to ensure they can maintain occupancy and continue to generate rental income."
Both high street and shopping centre rents are expected to soften by 0-5 per cent in 2017; but by catering to more accessible mid-range brands, landlords could stimulate domestic demand and reduce the market's reliance on mainland Chinese tourist arrivals, which were down 8.2 per cent year-on-year through January-October 2016.
"Brands like adidas and Nike have proved that mid-range brands have the potential to perform well in Hong Kong," concludes Chan. "By attracting more local shoppers, the expansion of this sector could lead to sustainable growth for the market and a more healthy, colourful and diverse shopping experience in the city."
It seems Hong Kong's status as a shopper's paradise is far from lost.
Download the latest edition of JLL's Hong Kong Retail Atelier here.
For more information about Hong Kong's Retail market, please contact Terence Chan or Cathie Chung.
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