Supermarkets and retail food stores thrive in Hong Kong
There is a rapid rise in country-themed food retailing and the trend will continue to thrive in the post-COVID world
There is no doubt that Hong Kong’s retail market has been hit hard by the COVID-19 pandemic. However, supermarkets and food store sales appear to have been unaffected. Rather, they seem to have benefited from the change of consumption habits that the pandemic triggered and brought the city to a standstill. Many in the city have gotten used to stocking up groceries and cooking at home with restaurant bans, lockdown, and remote working arrangements, keeping consumers at home. Hence, there has been a natural uplift in grocery sales.
Sales in supermarkets and departmental stores witnessed strong growth averaging about 14% (y-o-y) in the first seven months of 2020, while total retail sales suffered an average drop of 32% (y-o-y) during the same period. Typically, these outlets are preferred since they provide consumers with convenient and high-quality options in a relatively more hygienic environment. Moreover, Hong Kongers’ travel itch to their favourite destinations, like Japan and Korea, amid the pandemic, also gave rise to the popularity of Japanese- and Korean-themed supermarkets and retail food stores. Over the last six months, the market saw an emerging trend of major operators expanding or spinning-off new concepts of retail food stores in both core shopping and residential areas. These stores offer a more comprehensive shopping experience, which is unique to these countries, with increased items of fresh food, bread and pastry, organic options, and hot takeaway meals.
Figure 1: Supermarket and Total Retail Sales (Jan-Jul 2020)
Source: Census and Statistics Department, HKSAR
For example, in June “Muji” opened a 24,000-sq ft new Japanese go-to store for everyday essentials, with a focus on food, in Telford Plaza, Kowloon Bay. The new store dedicates more food-related goods and services to bring customers a wide range of fresh, frozen and healthy home dining options. Meanwhile, "New World Mart", which has been operating a Korean Food Speciality Store in Tsimshatsui for over 20 years, recently opened a new a 2,700 sq ft "One-Stop Korean Food Specialty Store" in The Forest in Mongkok. The retail arms of Henderson Land, “UNY” opened an 18,000 sq ft new lifestyle and food store in Henderson’s Kolour Yuen Long Store. UNY also spun off a new 5,000 sq ft concept store, “Guu San”, which is positioned as a boutique Japanese grocery store to anchor the Henderson’s H Zentre in Tsimshatsui. Meanwhile, Sun Hung Kai Properties’ retail arm, “Yata”, also rolled out a Japanese-style convenience store – “Konbini by Yata”, with the first store (3,700 sq ft) opened at the group’s Alva Hotel by Royal in Shatin. The store offers an assortment of Japanese light meals, ready-to-cook packages, and instant dishes, to accommodate the city’s busy urban dwellers to save time and effort in preparing Japanese style meals.
While one might think if these country-themed retail food stores will continue to thrive in the post-COVID world, it is expected that new consumer behaviour formed during the pandemic can become a habit. COVID will only speed up the reshaping of retail trends that have been undergoing even before the pandemic, such as the requirement for quick and convenient shopping, the importance of experience and social engagement in retailing, as well as the digital revolution on grocery shopping. Hence, for success in future, food retail operators are required to know the precise consumer preference with the use of big data. They will invest more in last-mile delivery, and their stores will play multiple roles than they do today, giving consumers ever-changing reasons to revisit. For real estate investors, the implications of a thriving food retailing industry could translate into the demand for retail shops, warehouses and cold chain logistics in the city. Although it is difficult to predict when the pandemic will be over, trends and changes are taking shape, and businesses should stay ahead to capture the opportunities that come along.