As Protests Continue, Hong Kong Retail Market Looks Gloomy

Hong Kong is facing difficult times. Since June — and currently in their 10th straight week — anti-government protests against a contentious extradition bill and mainland China’s influence in local politics have been gripping the city. Demonstrations have increasingly turned sour, with violent clashes between local citizens and the police. Earlier this week, Hong Kong International Airport, one of the world’s busiest, was essentially shut down for two days after protesters occupied the arrival hall and blocked departure gates.

The escalating tension is reverberating across the metropolis and being felt across a number of sectors. Retail is a big one. According to a recent report by the Hong Kong Retail Management Association (HKRMA), retail sales by value fell 6.7% in June from a year earlier, with further double-digit drops expected for both July and August, usually peak summer sales season.

In a statement, HKRMA said most of its members had seen a decline in sales since the start of the unrest, due both to unexpected store closures during the protests and a significant fall in tourists traffic. “Our key concern is that the prevailing protests will continuously damage Hong Kong’s international image as a safe and world-class tourist and shopping destination,” the group wrote. “There are already signs showing that Hong Kong is not a preferred destination to travelers from all over the world, leading to negative impacts on not only tourism but also hosting of international conferences and exhibitions.”

It’s not just local businesses that are affected. Global luxury retailers, too, are feeling the pain. In early July, Swiss luxury-goods maker Richemont said that demonstrations heavily hit local sales. Kering, Prada, Cartier and Hugo Boss have issued similar reports in their most recent earning calls. Sales of L’Occitane, for instance, plummeted 19% last quarter — Hong Kong is the company’s fourth-largest market.

Retailers and brands are also having to tread lightly in the Chinese market, in light of the unrest. In June, just a week after the start of the upheaval, Nike pulled a collaboration with Undercover in China after the Japanese brand published an Instagram post of the protests with the caption “no extradition to China.” Versace apologized to its Chinese customers last Sunday for releasing a range of T-shirts that suggested Hong Kong and Macau were separate countries. Chinese netizens have also called for boycotts of Coach, Givenchy and Swarovski after realizing the brands’ websites listed Hong Kong and Taiwan as separate to China. Amazon has been the latest to face their ire for carrying T-shirts featuring phrases such as “Free Hong Kong, democracy now.”

Although it’s too soon to tell, experts suggest sales will slow for these businesses in the coming months. PwC recently revised its Hong Kong full-year retail sales forecast to a 5% drop, from a 3% fall.

Simply put, the retail market is not looking good. The fact that Hong Kong is coming off its worst sales term in almost three-and-a-half years — sales in February fell by 10.1% and the decline has been steady for the last five months — doesn’t help. Neither does the impact of the ongoing U.S.-China trade war, the depreciation of the yuan or the slide in visitors, especially from the mainland, who generally account for 80% of sales in the segment.

As the divide rages on, the fortunes for international and domestic labels remain very much uncertain. Just like the city’s own future.

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