2017 was a year that saw growth and momentum rebounding in the Hong Kong economy. GDP growth has been consistent with economic activity revived on the back of Mainland tourist arrivals. Inflation remained well under control enabling greater spending in the economy.
Consumer confidence and outlook also remained buoyant and optimistic with the index score reaching the peak level at 108 by end of 2017. Hong Kong consumers has shown strong increase in confidence in personal finances compared to 2016 which is also reflected in positivity in Hong Kong’s stock market with the Hang Seng index increasing to around 30,000 by end 2017.
With the surge in tourist arrivals, retail sales have been the first sector to rebound growing at +2.2% in 2017. Luxury goods such as jewelry and watches have witnessed a revival after several years of decline, ending 2017 with a strong +5.2% growth. While FMCG for the year was subdued, Q4 saw a turn in the momentum as the industry grew for the first time in several quarters, driven mainly by core Personal Care categories and Food categories like Dairy and Frozen Foods.
Amongst retailers, Convenience stores saw strong demand as more premium ranges boosted growth. Hong Kong is a market where there has been strong acceptance for premium offerings and this will continue to be an area of opportunity. However successful premiumisation must be linked to the innate consumer needs it addresses and be available at a place and form that drives consumers’ desire to try and adopt.
Strong acceptances of Japanese and Korean product ranges have sparked product innovation in key categories. In addition, health concerns top the list for Hong Kong consumers. There is high awareness across different demographic groups that prevention is the most important thing when it comes to health issues. Innovation that targets this aspect will be well accepted.
From a channel perspective, while e-commerce is still at a nascent stage in Hong Kong, the incidence of online shopping continues to grow steadily with 80% of Hong Kong consumers having shopped online in the past year. This trend is bound to rise as the infrastructure supporting e-commerce success; like logistics and payment gateways gain scale. As consumers’ daily lives become increasingly digitized, consumer touchpoints and engagement are also transforming in the digital space, be it advertising, social media or digital tools like apps. It is critical for businesses to understand, measure and track the best engagement platforms for their consumers and win in this space.