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News Release

Hong Kong and Macau

International Retailers Continue Confidence and Investment in Hong Kong

More international brands established their first store or first stand-alone store in Hong Kong in 2013

HONG KONG AND MACAU, 25 February 2014 – On the back of solid retail sales growth in 2013, Hong Kong continues to be favoured by international brands as the gateway to expand their footholds in Asia. In 2013 alone, about 40 international brands established their first store or first stand-alone store in Hong Kong, according to the latest Retail Atelier report released by Jones Lang LaSalle today.

“Retailers indicate their continued confidence in Hong Kong by consistently investing in their existing stores and opening new flagships. While many neighbouring Asian cities are doing incredibly well in sales and profit margins, it is here in Hong Kong that the retailers find most comfort and confidence in housing their flagships.” said Tom Gaffney, Head of Retail at Jones Lang LaSalle Hong Kong.

According to Jones Lang LaSalle​, 2013 saw a continuing flurry of international brands establishing their first shops in Hong Kong. These include retailers in fashion & accessories, jewellery & watches, cosmetics, restaurants, skincare and even bookstore coming from America, Europe, Australia and Asia. Some brands such as Oroton, Topshop, Intimissimi and Innisfree opened street flagship stores to build up their presence, whereas others like Desigual, Volcom and Victoria’s Secret and the re-entry of Michael Kors adopted a more cautious approach of setting up stores in shopping mall environments.

The confidence from these international brands toward the Hong Kong retail market​ was supported by the strong underlying fundamentals of the market. Underpinned by robust sales of jewellery and watches, which recorded 22.9% growth, total retail sales in 2013 reached over HKD 494 billion, up 11.0% compared to the growth of 9.8% in 2012. Domestic consumption was supported by a healthy labour market, with the unemployment rate edging down to 3.2%, the lowest level since end-2012.

Meanwhile, the retail market received sustained support from the steady growth of the inbound tourism market. Tourist arrivals in 2013 recorded 11.7% growth in 2013, slower than the 16.0% growth in 2012. The growth in mainland Chinese tourist arrivals continued to slow – 11.1% y-o-y in 4Q13 – however, the market was boosted by the increase spending power by Chinese visitors.  According to the Hong Kong Tourism Board’s latest visitor spending report, per head spending by Chinese visitors on shopping increased by 7.5% y-o-y to HKD 4,246 in 1H13. In particular, per head spending from same-day Chinese visitors, who typically spend approximately HKD 2,500 per visit, increased 10.6% y-o-y, compared to overnight Chinese visitors, which grew only 8.5 y-o-y.

The changing profile of mainland Chinese shoppers, who increasingly prefer buying mid-range goods in locations beyond the city’s traditional core shopping precincts, is driving international retailers to reconsider their location strategies. While most of the new-to-market retailers in 2013 still preferred Central, Causeway Bay and Tsim Sha Tsui, malls in emerging new shopping districts including Shatin, Tuen Mun, Tseung Kwan O and other parts of the New Territories have started to attract retailers’ first or second stores in Hong Kong. For example, Desigual, a casual clothing brand from Spain, chose New Town Plaza in Shatin to house its first store in Hong Kong.

“Looking ahead, we believe international retailers will continue to choose Hong Kong to house their flagships, given the steady market growth driven by strong demand.” Gaffney said. “However, the retail sales in 2014 may post a slower growth due to some potential headwinds, including weaker private domestic consumption caused by a sharp correction in the city’s residential property market, as well as a possible slowdown in mainland visitor arrivals partly because of a temporary freeze on the number of pilot cities for the IVS Scheme.” Gaffney added.

“Though the risks imposed by these headwinds will likely be minimal, the commitment to Hong Kong expansion is still laced with caution. The traditional strategy for retailers to first build a store in the core districts before venturing further afield is a thing of the past, particularly as shopping habits of 54 million tourists, of which 75% are from China continue to diversify in terms of both geography and products. Against this background, retailers need to be bolder and more creative with their product and location strategies in order to stay competitive in the market.”