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Can e-commerce grow retail sales beyond inbound travelers?

By Luo Weiteng | HK EDITION | Updated: 2021-04-30 16:45
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Hainan duty-free

Competition from other tax-friendly shopping destinations such as Hainan, coupled with the dramatic decline of mainland tourist visits, further underscored the danger of overreliance on the mainland factor, Cheng said.

Hainan's free trade status will be better established by 2025, as an alternative to Hong Kong for mainland travelers. Macao also once became a preferred destination in late-2019, when social unrest in Hong Kong kept tourists away, Hui added.

On June 1, Chinese authorities released the Overall Plan for the Construction of Hainan Free Trade Port. The plan lays out a four-stage timeline for achieving the development. Authorities plan to have the free trade port basically in place by 2025.

Cheng calls for a major shift in retailers' operating strategies, toward e-commerce and online-to-offline integration, coupled with timely and targeted government support for structural transformation of the retail industry. "The COVID-19 lesson serves to remind Hong Kong retailers that they cannot afford to rely on a passive, single-channel revenue model, built on the mainland travelers," he said.

Cheng urges traditional retailers to rebalance their portfolios and strengthen capabilities for cross-border e-commerce, to serve overseas markets and customers, and to diversify their geographical exposure.

Retail sales jumped 30 percent in February to HK$29.5 billion due largely to the timing of the Lunar New Year, breaking 24 consecutive months of decline, according to the Census and Statistics Department. Although the surge was the biggest since February 2010, the government spokesman warned that the retail sector will remain disadvantaged in the near term as "inbound tourism remains frozen".

Macao has lifted the entry ban in a progressive manner since August, but its tourism figures have not matched the pre-pandemic level. "Everything may gradually return to a more normal level starting in 2022 — when local e-commerce could post a high single digit to teens' growth, while O2O acceleration could be a wild card too," Hui said.

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