Honored panelists pose for a photo at the forum on challenges and prospects for Hong Kong's retail sector held on December 2. Edmond Tang / China Daily

As 2011 draws to an end, Hong Kong retailers are bracing for an optimistic holiday season ahead, as both domestic shoppers and tourists continue to lend strong support just as they did throughout the year. However, looking ahead to 2012, external shocks from developed countries will undoubtedly cast clouds on the retail sector's outlook, thus requiring retailers to be more proactive in making it through the rainy days ahead.

A roundtable luncheon on challenges and prospects for the city's retail sector was held on December 2. Co-organized by Recruit, Hong Kong Management Association, and China Daily, it brought together government officials, academics, and various leaders together to share insight on the topic .

Secretary for Labour and Welfare Matthew Cheung Kin-chung said that thanks to robust domestic consumption and inbound tourism, Hong Kong retail sector enjoys a solid foundation.

"However, current volatilities in Europe and US are the major worry. High unemployment rate dents consumers' spending power, negatively affecting Hong Kong's re-exports," said Cheung, adding that "in the long term, mainland tourists under the individual travel scheme will be the key driver for Hong Kong retail sector."

The government released October retail figures on Dec 1, which showed a retreat due to economic worries. In volume terms, following a 15.1 percent increase of retail sales in September, October registered a 15 percent increase, the smallest in eight months. The growth in value also eased to 23.1 percent in October from 24 percent during the previous month.

According to government figures, total exports of goods dipped 2.2 percent in the third quarter, the first time in almost two years, as demand from major developed countries shrank. Hong Kong's jobless rate nudged up to 3.3 percent in the three months to October from 3.2 percent in the previous reporting period ended September. October growth in mainland visitor arrivals eased to 25 percent in October from a year earlier from a 33 percent high in July, according to Hong Kong Tourism Board data.

Hong Kong narrowly skirted a recession in the third quarter with 0.1 percent growth in economic output compared to the previous quarter. However, the city should remain vigilant in the coming year, as it is heavily reliant on external trade. Goldman Sachs cut its growth forecast for Hong Kong next year to 3.6 percent from a previous estimate of 3.8 percent, citing a property slowdown and weaker global growth. UBS lowered its GDP projection for Hong Kong in 2011 and 2012 to 4.5 percent and 3.3 percent respectively, due to global financial market turmoil and continued deterioration in external demand.

Rickey W.F. Szeto, executive director at Hung Fook Tong Holdings, a local herbal drink chain store, said that he observed a correlation between Hang Seng Index and their daily sales performance, especially during the past six months when the local stock index strongly reacted to financial market events on a daily basis.

"The phenomena can be called psychological spending. Hong Kong is a small place, everyday people can get information very quickly via various channels, which to a certain extent affects their shopping mood," said Szeto.

"For some daily shopping, it is not that they suffer a tight purse string, but rather they aren't in the mood, which translates into a reduced shopping frequency," Szeto added.

Ricky Ng, general manager at TSL Jewellery (HK) Co Limited, said that sales of some high-end items softened a little bit in September while mid-level products enjoyed rosy growth.

Ng emphasized that Chinese mainland consumers continue to show very strong spending power. However, diamond supplies tightened in recent two months, marking a downside risk, according to Ng.

Looking ahead next year, Ng said that market fluctuation poses serious challenges to retailers.

"Retailers must be very flexible under such circumstances in terms of operations, such as managing inventory. Speed matters a lot," said Ng.

Vincent Leung, senior vice-president of Skechers Hong Kong Limited, a footwear brand, said that retailers will still rake in sales revenue despite external economic problems, however, the worry will be about the margins.

"Since costs will continue rising and shoppers will look for discounts, profit margins will be depressed next year. Thus, effective operation management will be the key," said Leung.

China daily

(HK Edition 12/16/2011 page5)