Shoppers in Hong Kong rush to Shenzhen for bargain shopping spree

In a concerning development, Hong Kong's local consumer spending is being lost to Shenzhen, as reported by Nikkei Asia. This shift has gained attention on social media platforms like Facebook, with many expressing regret over the closure of favourite stores and the loss of Hong Kong's competitive edge.

One notable example is the Dah Chong Hong Food Mart grocery chain, which closed all 28 of its locations in April due to loss of customers to big membership-only supermarkets in Shenzhen and elsewhere.

The ease of access between the two cities is a significant factor in this trend. A subway ride from Admiralty Station in Hong Kong to Luohu border crossing in Shenzhen costs HKD 50 (USD 6.40) and takes about 50 minutes. In 2023, Hong Kongers entered mainland China via Shenzhen about 53 million times.

The appreciation of the Hong Kong dollar, pegged to the strong US dollar, is another contributing factor. As of May 1, the Hong Kong currency had strengthened 5% against the yuan compared to a year earlier, and around 10% from two or three years ago.

Cheap food and services on the mainland are a significant appeal for consumers. Shenzhen offers a variety of foreign and local brands, as well as inexpensive street food. Many Hong Kong restaurants add a 10% service charge to customers' bills for dining in, which is not the case in Shenzhen.

The quality of food and services in Shenzhen and other major mainland cities has reportedly improved, according to a 47-year-old Hong Kong resident who frequents the mainland with friends weekly.

To attract this demand, Shenzhen's public and private sectors are collaborating. Free bus routes link the border crossing to shopping centers and tourist hotspots. Malls like Wongtee Plaza offer discounts to shoppers who use the Hong Kong version of its electronic payment service, while others increase staffing at stores on Hong Kong holidays and provide free parking for cars with Hong Kong license plates.

This shift in consumer spending is expected to continue, with cities such as Singapore and some major urban centers in Asia expected to surpass Hong Kong in consumer spending due to factors including higher income levels, economic growth projections, and expanding consumer markets in these regions.

The slump in spending due to factors such as 'northbound consumption' is likely to continue, according to Annie Yau-tse, chair of the Hong Kong Retail Management Association. Raiky Wong, director of retail at real estate brokerage Centaline Commercial, expects commercial tenant transaction prices to fall by up to 5% this quarter compared to the previous one.

Despite the challenges, there are signs of resilience in Hong Kong's retail sector. For instance, three women in their 40s spend about RMB 2,000 each on a monthly or bi-monthly day trip to Shenzhen, with food making up about two-thirds of the cost. This suggests that while some spending may be shifting, there is still a significant market for retail in Hong Kong.

In conclusion, the shift of Hong Kong's local consumer spending to Shenzhen is a complex issue with multiple contributing factors. While it presents challenges for Hong Kong's retail sector, it also offers opportunities for cities like Shenzhen to attract more consumers and grow their retail markets.