Hong Kong e-commerce sales grow fast as prices soar

Written by By Felix Schein, CNN Hong Kong Hong Kong’s modestly priced outlets are once again attracting Chinese shoppers, but this year they are also fuel inflation at an alarming rate. A new report…

Hong Kong e-commerce sales grow fast as prices soar

Written by By Felix Schein, CNN Hong Kong

Hong Kong’s modestly priced outlets are once again attracting Chinese shoppers, but this year they are also fuel inflation at an alarming rate.

A new report from global consulting group Accenture, shows that the cost of online retail goods has grown by an average 20% year on year over the past three years.

But not all products have gained in value, reflecting the growing competition in Hong Kong’s increasingly crowded e-commerce space. Most popular among Chinese shoppers are items such as hairstyling equipment, household appliances and apparel.

A, available in stores but unavailable online, is on sale in Hong Kong at 11am, Sept. 1. Photographer: Mark Ossenmacher.

“Due to the overabundance of small and large items, many products actually depreciate,” Sui Fung Wai-hwan, managing director of Accenture’s Greater China consumer practice, said in an email interview.

“To mitigate this risk, third party marketplaces tend to offer discounts to enhance the perceived value.”

Demand for retail

The most popular e-shopping destinations in Hong Kong include Tmall and Taobao, with 63% and 57% of Chinese shoppers venturing to Hong Kong online to buy, respectively.

Their online sales have grown by 44% and 23% a year on average over the past three years, compared to annual retail sales growth of 7% in Hong Kong over the same period.

The report reveals that Hong Kong’s online malls now have an estimated 48 million users, equating to about 14% of Hong Kong’s population, and 16% of shoppers visiting Hong Kong’s shops, up from 9% in 2013.

A traditional shopping mall for Hong Kong’s Cantonese community. Photograph: James Leland/AFP/Getty Images

A U-Haul van is now a common sight in Hong Kong. Photographer: Mark Ossenmacher.

Fung noted that apparel and accessories are the most popular items online in Hong Kong, while only 29% of Chinese online shoppers are interested in luxury products — which could be why both Alibaba Group Holding and NetEase are building up their luxury online commerce space, including through popular commerce platforms Tmall and Ali Mall, respectively.

Online shopping is also rapidly gaining traction in Hong Kong’s second city of Shenzhen, where it accounts for 38% of overall online sales. This could be explained by the lower cost of living in Shenzhen and the fact that residents are frequently asked by tourists and friends about affordable prices, Fung noted.

Shop at home

Currently, about 70% of Hong Kong shoppers travel abroad for shopping, including 17% who visit China, the rest who go to Britain, France, Germany and the United States.

Beyond the convenience of shopping at home, the strong growth in Hong Kong’s online sales is tied to a “growing domestic demand for high value branded goods,” according to the report.

But Fung warns that sales growth in Hong Kong will drop to just 4% a year in the near future, as competition intensifies among brick-and-mortar retailers. Hong Kong’s malls are increasingly moving online and competing for the same shoppers.

Online shopping is expanding rapidly in Shenzhen, China. Photograph: James Leland/AFP/Getty Images

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