People wearing face masks walk past shuttered shops in Hong Kong, Feb 5, 2021. (LO PING FAI / XINHUA)
Hong Kong’s retail market is poised for 36 percent year-on-year growth this February, boosted by stronger consumer sentiment and a lower base a year ago, professional services network PwC forecast on Tuesday.
The city’s retail sales in February are projected to reach HK$31 billion (US$4 billion), compared to HK$22.7 billion in the same period last year when the pandemic first struck, according to Michael Cheng, Asia-Pacific, Chinese mainland and Hong Kong consumer markets leader at PwC.
He attributed the expected sales spike to an improved shopping sentiment as local consumers engage in festive purchasing. Wealth accumulated from the recent stock market bull run and pent-up demand from lengthy curbs to physical shopping will fuel the spending spree, Cheng said.
Looking ahead, PwC forecast Hong Kong’s retail sales in 2021 will rise by 15 percent to HK$376 billion after declining by one quarter in the pandemic-torn 2020
PwC predicted the spending will cluster around necessities, cosmetics, consumer electronics, home education and work-from-home equipment as well as luxury products as means of wealth preservation.
Looking ahead, PwC forecast Hong Kong’s retail sales in 2021 will rise by 15 percent to HK$376 billion after declining by one quarter in the pandemic-torn 2020.
The forecast is based on an expectation that travel restrictions will be substantially lifted by the third or fourth quarter along with an improved consumer sentiment. However, “the (15 percent growth) expectation is not so optimistic”, Cheng said, noting that uncertainties in the global economic outlook and the rollout of vaccines continue to weigh on consumption.
The COVID-19 pandemic dealt a heavy blow to the city’s retailers last year amid the economic downturn and a de facto tourism halt with inbound travelers from the Chinese mainland shrinking by 94 percent to the 1998 level, leading to a 10-year sales low of HK$326 billion.
Backed by an expected border reopening in the Year of the Ox, PwC forecast the retail sector performance will return to its 2019 level within one to two years.
PwC suggested retailers look for opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area due to the purchasing power of the region and structural issues in Hong Kong’s operation environment for brick-and-mortar stores.
“Retailers are still facing dire challenges in terms of high rent, labor cost and other operating expenses, that are eroding the price advantages they used to enjoy (from an average price gap of roughly 30 percent to 10 percent)”, said Rebecca Wong, tax and business advisory partner at PwC China. Wong suggests retailers engage in e-commerce to get faster entry into the market.
Consisting of nine cities in Guangdong province, and the Hong Kong and Macao special administrative regions, the Greater Bay Area is home to more than 70 million people and has a GDP of US$1.69 trillion (HK$13.1 trillion) in 2019. That is more than four times that of Hong Kong’s GDP in the same year at HK$2.87 trillion.