Hong Kong has impressed the world with its flattened COVID-19 curve, but the city’s freefalling retail sector is now under scrutiny.
The government reported a record drop in retail sales this Tuesday, with a 44-percent fall during the February lockdown to $2.93 billion (22.7 billion HKD). And across different sectors of retail goods, luxury is the one that’s been hit hardest. The sales of jewelry, watches, clocks, and valuable gifts garnered 58.6 percent fewer sales this January and February when compared to the same period last year. Also, sales of medicines/cosmetics and wearing apparel were cut by 42.7 percent and 49.9 percent, respectively.
And local consumers don’t expect Hong Kong to recover soon. The recent Hong Kong consumer research survey by the global market research and consulting firm Ipsos, Hong Kong Consumer & COVID-19 Study, shows that people are split over when Hong Kong will recover. Among the 1,000 participants, approximately one-third thought recovery would occur in 2021, with 18 percent of those expecting a recovery in the second quarter of 2021.
COVID-19 has been a magnifying glass for existing problems, and since Hong Kong’s luxury sales were already flagging before the pandemic — largely due to social unrest — it’s now getting hit twice as hard.
Current retail sales also reflect a bleak outlook for travel retail. With the lingering worry about hostile sentiments from Hong Kong locals, as well as continued travel restrictions, mainlanders might stay away from the city for quite some time.
In comparison, mainland China’s total retail sales over the first two months of 2020 were down 20.5 percent, according to The National Bureau of Statistics. This was half the size of Hong Kong’s slump despite a national lockdown, and the mainland has shown early signs of recovery, including long lines at Chanel stores. The feeling here is that luxury brands should zero in on the mainland market for now because Hong Kong probably won’t rebound anytime soon.
The Jing Take reports on a leading piece of news while presenting our editorial team’s analysis of its key implications for the luxury industry. In this recurring column, we analyze everything from product drops and mergers to heated debates that sprout up on Chinese social media.