HONG KONG — Retailers here hoping for a spending lift during China’s “Golden Week” holiday look set to be disappointed.
This year’s National Day holiday, marked annually on Oct. 1, and the Mid-Autumn Festival fell just a few days apart, leading some businesses to hope that the combined vacation days might spark some life in the struggling retail sector. National Day is celebrated with a weeklong vacation in Mainland China and is typically one of the busiest shopping periods for the nation, akin to Black Friday or Christmas in the West.
Data leading up to the holiday period was lackluster. In Hong Kong, visitor arrivals from Mainland China, the main driver of the city’s retail spending, fell 7 percent year-on-year in August though they narrowed from the 10 percent decline seen in July. Retail sales fell 5.4 percent, the sixth straight month of decline.
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The quieter-than-usual shopping period was clearly visible. One Chanel boutique in the city had prepared for the usual rush by having 18 staff on hand, far more than were needed for the five customers perusing the store. Meanwhile, sales assistants in the watch department at a nearby Harvey Nichols store were visibly bored and playing with their phones — one was even dozing — although there was some life in the women’s wear section.
The holiday period retail was “very tough,” Helen Mak, senior director of retail services at Colliers International, a property consultancy, said. “Obviously the Mainland Chinese are going away. They’re not coming to Hong Kong. They are now in Tokyo, Seoul and Taiwan. It’s the end of the holiday so it’s not going to bring back business for the last four to five days.”
She said Colliers is expecting retail sales to drop by 20 percent to 25 percent for the year and the downturn to extend until the end of next year. “The Mainland duty cuts, the economy, conditions don’t look really positive and then recently the stock market performance in China was very terrible,” she said.
Barclays retail analyst Emily Huang agreed, saying Hong Kong would continue to suffer as international competition for Mainland Chinese shoppers increased.
“We expect higher spending visitors to continue to diverge to other travel destinations, particularly destinations with depreciated currencies,” she said. “We believe Hong Kong’s product pricing advantage could also diminish if the U.S. dollar continues to be relatively strong and if China at some point removes more import tariffs or consumption taxes for more goods in China.”
In May, China cut import taxes on a number of consumer items, ranging from clothing to skin care, making it less attractive for mainland Chinese to shop overseas.
Mak noted that rents had started to come down, easing costs on retailers. “First-tier rents in Causeway Bay are now only a third of what the previous tenant was paying. The last lease would be signed about three years ago,” she said.
She cited one beauty brand who moved into Russell Street in Causeway Bay, one of the world’s most expensive commercial streets, which signed a rent agreement that was 59 percent of what the previous tenant had been paying.
In August, Coach shuttered its flagship in Central, pulling out of the lease two years early. Brands such as Chow Tai Fook and Burberry have said in recent months they were looking into renegotiating leases in Hong Kong to adjust to the softening of the market.