Consumer Patterns and the Retail Landscape in Hong Kong are Changing Due to E-Commerce.

 

Retailers and landlords in Hong Kong must welcome reform. real estate qatar

The emergence of e-commerce is expected to post substantial growth and disrupt the local retail industry in the next few years, according to JLL's new retail white paper, "Reimagining Retail - Bricks, Mortar, and the Evolution of E-Commerce in Hong Kong." Smaller mom and pop stores, regional shopping malls, and smaller shopping centers are projected to face direct e-commerce rivalry. To survive, prosper, and ride the wave of the future, landlords and retailers must adopt emerging technology, new resources, and new retail strategies in order to survive, thrive, and ride the wave of the future.

 

Hong Kong has lagged behind many other major global cities in terms of online transactions as a percentage of overall retail sales. However, according to industry figures from the Hong Kong Trade Development Council, online sales grew at a CAGR (Compound Annual Growth Rate) of 15.1% between 2011 and 2016. In comparison, total retail sales grew at a CAGR of just 1.5 percent during the same time span. A recent JLL survey of market participants revealed a similar degree of optimism, with 72 percent of retailers and 90 percent of landlords believing that online sales will rise significantly over the next five years.

 

Despite the fact that online sales are unlikely to replace physical stores in Hong Kong in the near future, owing to their greater variety and lower prices, more and more e-commerce behemoths are seen moving into bricks and mortar retailing, bringing with them new technologies and the aim of reshaping both the online and offline shopping experience. For example, Chinese online retailer JD.com has partnered with Hong Kong-based Fung Retailing, which operates over 3,000 stores locally and internationally, to develop artificial intelligence-driven smart retail solutions.

 

Omni-channel retailing is redefining the mall.

 

E-commerce has a significant role to play in the development of Hong Kong's retail market. Rather than relying solely on online sales, JLL believes the market is well positioned to evolve toward an omni-channel solution, which allows a variety of retailing platforms and formats to be seamlessly integrated to provide a rich source of data that can be analyzed to create a personalized mark.

 

According to Denis Ma, Head of Research at JLL Hong Kong, "Hong Kong's retail market's future lies in its transformation into omni-channel retailing. From our viewpoint, the rising popularity of mobile payments and the broader acceptance of big data analytics will propel us in this direction, while also improving consumers' overall shopping experiences. This will almost certainly necessitate increased investment in technology by retailers and landlords, such as mall operators."

 

To close the price gap between online and offline shops, bricks and mortar retailers can differentiate themselves by offering value-added services in addition to selling merchandise. Personalized goods, extended guarantees, bespoke post-purchase services, loyalty schemes, and even special events are examples of these services.

 

Another strategy for luring customers into physical stores is "experiential shopping." When done correctly, this isn't all about intricate designs or gimmicks inside a store's four walls; it may even include a signature fragrance or soundtrack, technologically advanced fitting rooms, or a customer-friendly checkout method.

 

However, widespread acceptance would have ramifications for how Hong Kong malls have historically worked. Rental benchmarks are one source of concern, as most mall rents are made up of a base rent plus an agreed-upon turnover portion. This rental model necessitates insight into individual store retail sales. With the rise of mobile payments, this information would eventually become less available, requiring landlords and mall operators to rethink their methods.

 

The use of big data analytics may also lead to a similar situation. Retailers face challenges in determining which data is most valuable for their company and having it transformed into real insights that will affect efficiency and bottom lines. In order to help them draw a big picture of how their sales and marketing strategies match, they must invest in the right data storage, analytics tools, and digital analysis expertise.

 

JLL's Asia Pacific's Local Director of Retail, James Assersohn, added, "In the coming years, e-commerce will become more common in Hong Kong. However, online retailing will not be able to replace the shopping experience and pleasure offered by physical stores, so bricks and mortar will continue to exist. Retailers and landlords, on the other hand, should be well-prepared for the future of retailing, which is omni-channel retailing."

 

JLL Hong Kong's Local Director of Retail, Eric Cheng, said, "In Hong Kong, store rents can eat up as much as 25% to 30% of sales revenue. As e-payments become more common in Hong Kong, more retailers are expected to expand their online sales platforms. The city's most successful e-commerce outlets, which are primarily aimed at the lower-end retail market, have already been competing directly with conventional "mom and pop" stores as well as smaller shopping centers designed around subdivided shops. Retailers would choose to open flagship stores in core areas to small shops in different districts, so the vacancy rate of regional shopping malls in sub-urban districts that depend primarily on local customers would rise."

 

"Physical stores, on the other hand, will undoubtedly be in higher demand than ever, but their function and operation will change. Following a three-year downturn in retail rents in Hong Kong, the cost of opening a physical store has dropped dramatically. This creates a natural window of opportunity for online retailers looking to grow into the physical world, enabling them to secure desirable retail spaces at more affordable rental rates "he declares