PwC: Hong Kong's Economically Important Retail Sector to Grow Between 4% to 6% in 2018

Hong Kong’s retail sector is expected to improve further in 2018—on the back of a bullish economic outlook both globally and in China—while the sales rebound that started in 2017 will continue for the next five years, said PwC today.

Retail sales in Hong Kong for the first 11 months of 2017 increased 1.8% over the same period in 2016, the firm said, expecting it to grow between 4% to 6% in 2018, which is about HK$465 to 480 billion, the firm added.

Given the traditional shopping spree towards year-end, the full year increase could reach 3% year-on-year, PwC forecast.

Despite some store consolidation and a retreat from main street locations, luxury goods, especially jewelry and watches, was one of the best-performing sectors in 2017 and is expected to further recover in 2018, contributing to a further improvement in the overall retail sales in Hong Kong for this year and onwards, the firm observed.

“All time high stock and real estate markets, both local and global, have created a significant wealth effect, and much improved sentiment in consumption” said Michael Cheng, Asia Pacific & Hong Kong/China Consumer Markets Leader, PwC. “In addition, tourist arrival numbers in Hong Kong, particularly from China, have been encouraging and recovering steadily in 2017 under a more stable political and social environment. “

Combined with low jobless rate and a recent weakening US Dollar against major currencies, Hong Kong’s retail sector should be recovering well in the medium term and exceed the all-time high in 2013 within the next 5 years, he added

Sector too dependent on Chinese tourists

However, the sector is still very much dependent on tourism – particularly tourists from China, PwC pointed out.

From January to November 2017, Mainland Chinese tourist numbers increased 3.6% year-on-year, compared to 3.1% for all tourists.

“A balanced mix of global and Mainland visitors can boost domestic consumption and benefit the long-term development of Hong Kong’s retail sector,” said Cheng.

The Chinese government recently slashed tariffs on 187 imported consumer goods, including wines and spirits, pharmaceuticals, and food. While PwC believes this policy will strengthen domestic consumption in China, it said that will only a modest effect on Hong Kong’s retail sector.

“Hong Kong remains the world’s freest economy, providing high quality goods under a well-established legal system that provides excellent consumer protection,” said PwC China Tax Partner Rebecca Wong. “This encourages legal imports and reduces the attractiveness of purchases made through irregular channels, thus bringing long-term benefits to both Hong Kong and the Mainland retail sectors, as well as to promote consumption upgrade in the Mainland.”

Retailers need to be disruptors

For Hong Kong and even global retailers to win over the longer term, they need to be a game changers within their industry, PwC said.

“Retailers need to transform themselves: from being disrupted to be disruptors. Embracing technology and data in order to provide unique customer experiences through diversified platforms and logistics networks are the keys to success,” Cheng advised.

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