What: Hong Kong's December retail sales fell 9.7% year-on-year to HKD 32.8 billion, marking a tenth consecutive month of decline despite increased visitor numbers, as consumer patterns shift and regional competition intensifies.

Why it is important: This trend reveals the growing complexity of regional retail competition, where increased visitor numbers no longer automatically translate to proportional retail growth.

Hong Kong's retail sector continues to face significant challenges, with December sales falling 9.7% to HKD 32.8 billion despite an 8.3% increase in visitor arrivals to 4.26 million. The decline was particularly pronounced in key categories, with jewelry, watches, and valuable gifts dropping 13.8%, and clothing and footwear falling 10.2%. Mainland Chinese visitors, while increasing 5.2% to 3.10 million, showed changed spending patterns. The government attributes this disconnect between visitor numbers and retail performance to shifting consumption patterns and the strong Hong Kong dollar. For the full year 2024, total retail sales value decreased by 7.3%, while visitor arrivals increased by 30.9% to 44.5 million, highlighting a fundamental shift in the relationship between tourism and retail spending.

IADS Notes: Hong Kong's December retail sales decline of 9.7% reflects deeper structural changes in the region's retail landscape. This trend aligns with findings from August 2024 that showed a fundamental shift in shopping patterns, with tourist expenditure in 2023 falling 48% below 2018 levels, impacted by the strong Hong Kong dollar and changing travel preferences. The challenges are further complicated by the rise of competing destinations, particularly Hainan island, which has emerged as a significant duty-free shopping hub, as noted in July 2024 analysis. These developments suggest that Hong Kong's retail sector is experiencing not just a temporary downturn but a fundamental transformation in its role as a regional shopping destination, requiring retailers to rethink their traditional reliance on mainland Chinese tourism and luxury shopping.

Hong Kong December retail sales value falls 9.7% from a year earlier