Nielsen provides insight into Hong Kong's economic outlook and retail backdrop.
Hong Kong’s economy improved in Q4 2016 on the back of a recovering tourism industry and increased retail sales. GDP exceeded expectations by growing 3.1 percent, the fastest quarterly acceleration since early 2015.
Consumer confidence dipped two points to 95 at the end of 2016 but remained well above performance earlier in the year. Reflecting on the macroeconomic situation, consumer sentiment toward personal finances and job prospects improved in the second half of the year with almost half (44 percent) believing it is the right time to buy the things they want and need.
However there is a definite feeling of uncertainty about future job prospects in Hong Kong that differs to their mainland counterparts with less than one in three Hong Kong consumers believing job prospects will be good or excellent in the next 12 months compared to two in three Chinese consumers.
Hong Kong’s population is forecast to grow by six percent to reach 7.7 million in 2025. However, its rapidly aging population represents both an economic challenge to stimulate spending and consumption but also an opportunity for manufacturers and suppliers to cater to changing consumer needs. In 2025, 23 percent of people in Hong Kong will be aged 65 years and over, compared with 15 percent in 2015. Household dynamics are changing. Not only will households be older, they will also be smaller, with the average number of people in a household forecast to decline from three members in 2015 to 2.8 members in 2025. This means manufacturers must cater to different consumer needs – smaller, convenient packaging that offer value.
Today, Hong Kong shoppers are visiting most retail channels less frequently. They are generally price sensitive and aware of price changes to their regular grocery brands. Though most shoppers are open to trying new brands, they usually stick to their favourites. In-store promotions on favourite brands continue to encourage store switching.
Given that consumers are cautiously optimistic, it is expected local demand will continue to be steady. Solid opportunities still exist as visitors from mainland China remain big shoppers across a number of categories. The opening of e-commerce and cross-border platforms is creating a strong foundation for businesses to connect with a wider base of mainland China consumers. It is critical for businesses to make the right investment choices across channels and drive innovations to address consumer expectations.
Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.