Hong Kong is poised to play catch-up with e-commerce and redefine retailing once again.
Where do you shop? That used to be a simple enough question to answer. Food comes from supermarkets, shoes come from shoe stores, cold medicine from pharmacies. Simple. But the very concept of shopping has been redefined over the last generation. It's not an easy answer any longer—and one that is having a massive impact on Hong Kong's retail real estate.
During the great retail “crisis” from 2014-17, when sales plummeted and rents dropped up to 45%, mall operators, landlords and brands alike sought to reenergise the industry with more experiential shopping and better dining choices. The crisis, it seemed, stemmed from the massive growth of online shopping. Not only were mainland visitor numbers falling, but Hongkongers were shopping from their phones and desks. In reality only some were, but that doesn't mean bricks and mortar shopping isn't heading for reinvention.
“The retail market has observed the strongest recovery since the 2013-14 period. Now, retailers and shopping malls are adopting millennial-centric strategies that focus on experiential shopping and digital platforms,” said Colliers International in its mid-year market survey. Affordable luxury, cosmetics and pharmaceuticals are underpinning demand for space, and rents are slowly picking up: 0.3% this year so far with a forecast for 1% to 3% by December. But digital platforms do not dominate yet. According to JLL'S Reimagining Retail, Hong Kong's online retail market is underdeveloped despite being primed for it; consider the high mobile phone penetration, stellar communications infrastructure, and high consumption rates. In 2011, Internet retail sales value in Hong Kong clocked in at US$900 million, with JLL projecting US$3.7 billion by 2021. A 300% increase, sure, but compare it to South Korea's US$22.2 and US$103 billion, Japan's US$53 and US$113 billion, and US$145 and US$372 billion in Western Europe, and it's a drop in the bucket. In 2016, 17.1% of retail sales in China came online. In Hong Kong it was 3%.