Hong Kong vs Shenzhen: Which is winning shoppers?

What happened Hong Kong’s retail and property sectors are feeling the squeeze — new data reveals a decline in consumer spending and property transactions. According to the Census and Statistics Department of Hong Kong, total retail sales in July 2024 dropped by 11.8% YoY to HK$29.1 billion ($3.72 billion). Overall, the retail sector has seen a 7.3% decrease in sales for the first seven months of 2024 compared to the same period last year. Meanwhile, the SAR’s property market is also under strain. August saw 4,729 property registrations across various sectors — from new private residential units to commercial spaces and parking — a 10.1% month-on-month decline and the lowest level in almost six months, according to the Hong Kong Land Registry. Once viewed as Asia’s luxury hub, as well as one of the region’s most expensive cosmopolitan cities, Hong Kong’s property prices have now fallen to their lowest since late 2016, according to Centaline’s City Leading Index. The Jing Take A government spokesperson attributed the city’s decline in retail sales to shifting consumption patterns, citing the strong Hong Kong dollar and a surge in overseas travel during the summer months, as reasons for dampened domestic spending. Hong Kong’s retail slowdown is also closely tied to changes in tourist spending. In China, the ongoing economic downturn, shifts in consumption priorities, and a greater focus on savings due to uncertain employment conditions have impacted mainland Chinese tourism to Hong Kong, once a popular shopping destination for Chinese visitors. “Post-Covid, mainland Chinese consumers are prioritizing experiences over material goods, driven by a desire to reconnect, make up for lost time, and live in the moment,” Christine Li, head of research for Asia-Pacific at Knight Frank told CNBC this month. This shift in consumer values has led to softer luxury sales, particularly among Chinese shoppers, a crucial demographic for Hong Kong’s retail industry. While Hong Kong’s retail sector faces headwinds, nearby Shenzhen is emerging as an attractive alternative for the SAR’s own shoppers. With a greater variety of shopping, dining, and entertainment options at lower prices, Hong Kong residents are flocking across the border in droves. In 2023 alone, Hong Kongers made 53 million trips to Shenzhen, driven in part by the favorable exchange rate between the Hong Kong dollar and the Chinese yuan. “On top of outbound tourism to the mainland [and overseas], residents are also spending more on daily necessities such as groceries and prescription glasses,” Chim Lee, a senior China analyst at the Economist Intelligence Unit told Al Jazeera in May this year. The lower prices in China, the relative strength of the US dollar, and increased familiarity with mainland apps and services have all encouraged this trend, according to the same report. As Hong Kong’s retail and property sectors continue to face challenges, the broader question remains: Can the city adapt to changing consumer behavior and economic conditions fast enough to recover? Ultimately, a deeper understanding of evolving mainland consumer habits and strategic adjustments to cater to both domestic and cross-border shoppers may offer a way forward for brands, retailers and developers in the city. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

Hong Kong vs Shenzhen: Which is winning shoppers?

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Published September 18, 2024

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Hong Kong vs Shenzhen: Which is winning shoppers?