HK's Golden Retail Era is Over

A mall with empty shops isn't a very inspiring experience

In another sign that Hong Kong's economy is floundering is to look at the retail sector, plunging to pandemic levels. Yes, not pre-pandemic but during the Covid-19 era.

Mainland visitors, who used to be the priority customers in luxury boutiques snapping up designer handbags to pharmacies for shampoo to baby formula are tightening their belts and preferring a cheaper way to visit the city.

Hong Kong's retail sales plunged 7.3 percent in the first seven months of the year compared to 2023, according to government data that was published on Friday. And that's a big drop considering there was a 52.2 percent increase in visitors during the same period.

Street-level shops are also sitting empty

Mainland visitors who stayed overnight spent HK$6,495 (US$833) per capita in 2023, while same-day visitor spending plunged 37 percent to just HK$1,383 last year.

Why? 

"The reduced spending of middle class Chinese tourists in Hong Kong can be attributed to the economic slowdown -- started by the property downturn, shift in consumption patterns, increased focus on savings due to challenging employment prospects and changing travel preferences," said Christine Li, head of research for Asia-Pacific at Knight Frank.

She says this has led to mainland visitors focused more on experiences than material goods, and there are first-timers to Hong Kong who don't have has deep pockets as previous Chinese tourists. As a result they opt for "zero-dollar" tours, where everything has been prepaid.

"They take pictures for their online accounts, but they don't spend money. They're not spending the same amount of money in shops or restaurants like they used to," observed Simon Smith, Savills' regional head of research and consultancy for Asia Pacific. "The golden era for Hong Kong's retail market is over. That's the reality."

Of the 30 shops in Heritage 1881, only 3 open

Ouch.

To make it even worse for the local retail scene, Smith says Hongkongers are rushing to Shenzhen on the weekends to take advantage of restaurants and shops at one-third of the cost in Hong Kong.

Shopping malls like Heritage 1881 in Tsim Sha Tsui are practically empty. It used to have high-end shops like Tiffany and Co, watch shops and Shanghai Tang, as well as a very expensive Japanese restaurant, but according to Bloomberg, of the 30 shop spaces, only three are occupied now.

Many analysts say it will take a long time before Hong Kong's retail industry bounces back, and when that happens how many shops will survive that long?