Peter Liang notes hard times for luxury retailers and landlords, as tourist numbers shrink, have little fallout for broader economy

Business leaders and some economists have blamed the prolonged downturn in retail sales on the fall in the number of tourists, especially those from the Chinese mainland. To them, the solution looks simple. All the government needs to do to reverse the trend is to spend more public funds on promoting tourism by building new attractions and upgrading existing ones.

Latest official figures show that the seasonally adjusted retail sales in the first quarter of this year fell 2.3 percent by value and 2.2 percent by volume from the yearearlier period. Analysts predict the downtrend in retail sales will continue in the second quarter and beyond.

Should we be worried about it? The simple answer is yes, because the retail sec- tor — together with catering and related logistics activities — is one of the largest employers in Hong Kong. Despite its relatively small, about 4 percent, contribution to the economy, the retail industry employs more than 350,000 people — or 10 percent of the entire workforce.

The retail industry boom in the past was largely attributed to the flood of visitors, mainly from the mainland, since 2003. But even at the peak of the boom in 2009 tourism expenditure contributed less than 30 percent of the retail industry’s value added, according to government data.

To the average Hong Kong consumer, the tourism-generated retail boom came with a heavy cost. Shops selling highprofit-margin luxury merchandises to free-spending tourists have driven many outlets favored by local shoppers away from all the major commercial districts —

Retailers and caterers will have to recognize that their fortunes will eventually be tied not to the ebb and flow of inbound tourism but to the steady support of local consumers.

including Causeway Bay on Hong Kong Island, and Mong Kok and Tsim Sha Tsui in Kowloon.

The resulting surge in shop rentals in those districts has rapidly eroded Hong Kong’s competitiveness against other tourism destinations. More and more mainland shoppers are finding it cheaper to buy the luxury goods they covet in Tokyo, London or Paris.

What’s more the major online stores — including Taobao and Amazon — offer mainland consumers the convenience of shopping online from a long list of manu-