Can e-commerce grow retail sales beyond inbound travelers?

Pandemic pushes online orders

"The pandemic has introduced e-commerce to many local consumers for the first time," said Pedro Yip, partner and head of retail and consumer goods practice, Greater China, at US-based consulting firm Oliver Wyman. According to Oliver Wyman, e-commerce demand in Hong Kong has doubled in 2020, with over 2 million local consumers making online purchases.

The COVID-19 pandemic prompted more consumers to buy groceries and consumer goods online. They are unlikely to revert back because of the convenience and exclusive promotions with online shopping, said Emily Leung, senior analyst at Euromonitor International. E-commerce is forecast to grow at a 13 percent compounded annual growth rate for the next five years.

Euromonitor International expects tourism to rebound once borders reopen. The local retail sector is highly tourism-dependent. E-commerce in Hong Kong is gaining traction as major brands and shopping platforms expanded through the pandemic and tourist lockout.

Retailers lag behind e-commerce

Before the pandemic, a study conducted by the Census and Statistics Department of Hong Kong in 2019 found that 313,001 out of 344,000 establishments surveyed did not adopt e-commerce sales. Of the establishments not adopting e-commerce sales, 86 percent cited "inclined to maintain current business model" as the reason.

Yip categorized three types of retailers from an e-commerce perspective: those who embraced e-commerce early (and are now reaping the benefits); those who haven't invested in e-commerce; and those who implemented e-commerce poorly, thereby being unable to fully leverage it.

"Many Hong Kong retailers are in the last two categories: They are too focused on return on investment and do not invest until they see the demand," he said. "It is often too late when the demand is proven. They would face an uphill battle." In addition, those with effective e-commerce infrastructure received orders beyond their fulfilment capacity, taking business away from those without online channels, Yip added.