Occupy Central may cost retailers HK$2 billion – but don’t panic

With the world watching, the Occupy Central demonstration took a dramatic turn yesterday after the Hong Kong government called off the promised dialogue with protest leaders, roiling thousands of protesters to again fill up some of the already cooled-down protest forts such as Admiralty, Causeway Bay and Mong Kok.

The week-long protest has brought mounting frustration not only to participants, but also to some politically apathetic Hong Kong residents who have been voicing complaints over inconveniences caused by the rally, and more severely, to retailers for which businesses have been impinged by blockades and large groups of people.

The Hong Kong Retail Management Association reported earlier this week the retail landscape in Hong Kong was experiencing a big sales slump ranging from a 15% to 50% decline in sales during the “Golden Week” holiday, with jewellery and fashion sectors bearing the brunt of the ongoing protest.

As a result, the protest may cost the Hong Kong industry some HK$2 billion, claim some economic experts such as Raymond Yeung, senior economist at ANZ Research, based on the “Golden Week” traffic.

However, in an interview with Marketing, Yeung said the city wide rally may not be the only culprit in the overall dismal retail market in Hong Kong.

“Sales of luxury goods, automobile brands and consumer durables are indeed suffering from a decline which may in part be due to the recent protest, particularly when it falls during the Golden Week holiday, which represents half of the overall retail sales in October, ” he said.

“But the declining retail sales is mostly attributed to the changing shopper behaviour among Mainlanders, who no longer come to Hong Kong for luxury products as a result of China’s anti-corruption policy and Hong Kong’s plans on restricting Mainland tourists, to name a few.”

The abrupt protests have only served to add fuel to the fire, he stressed.

“The HK$2 billion figure represents only 6% of the month’s total retail sales, just a small portion of the massive HK$500 billion retail sales yearly. This can’t be a worrying number.”

Notably, the top-tier supermarkets and convenience stores are likely to hold up, Yeung said, while restaurants, especially pizza delivery businesses, have posted better sales growth during the protest period.

“The outcome of the protest is highly unpredictable, hence, we cannot tell how big the damage will be to the Hong Kong economy in the long run.”

If the protest continues to escalate, the real worry for Yeung, is the political deadlock will eventually affect Hong Kong’s business sentiment and consumer confidence at large.

“The slowdown of China has already affected the city’s growth momentum. If the protests continue to drag on, Hong Kong’s Q4 outlook will increasingly turn gloomy.

“Currently, it’s too premature to alter our forecast for the economy to expand by 2.5% in 2014. But the risk of our expected shortfall is surely heading towards the downside.”

That being said, the temporary depression in retail sales should not have as big an impact on the entire retail landscape in the long run as a quick recovery is expected, he added.