What: Hong Kong retail sales saw modest growth in July 2025, but ongoing structural challenges persist as increased visitor arrivals fail to translate into proportional spending.

Why it is important: The disconnect between foot traffic and spending underscores the need for Hong Kong’s retail sector to innovate, especially as luxury gifting categories remain volatile amid changing travel patterns.

Hong Kong’s retail sector reported a 1.8% increase in sales value in July 2025, marking the third consecutive month of gains and reaching HK$29.7 billion. Yet, this apparent growth masks underlying challenges, as sales volume rose by only 1% and the first seven months of the year still show a 2.6% decline in value and a 4% drop in volume compared to 2024. Despite a 12% rise in visitor arrivals—driven largely by mainland Chinese tourists—spending patterns have shifted, with many visitors opting for short, budget-conscious trips and local residents increasingly shopping across the border due to currency advantages. Luxury gifting categories such as jewellery, watches, and valuable gifts posted a robust 9.4% year-on-year increase in July, but broader retail categories remain volatile. Government efforts to stimulate retail through tourism and mega events have yet to reverse the underlying trend, as the sector continues to grapple with evolving consumer preferences and intensified regional competition.

IADS Notes:

Hong Kong’s retail sector has undergone a fundamental transformation over the past year, marked by a persistent disconnect between rising visitor arrivals and actual retail spending. As highlighted by Inside Retail in June 2025, retail sales continued to decline for the fourteenth consecutive month, even as tourist numbers grew, with jewellery, watches, and valuable gifts showing only marginal resilience. The Financial Times in May 2025 documented the emergence of “special forces” tourists from mainland China, who now prioritize experiences over shopping and spend significantly less per visit, a trend that has reshaped the city’s traditional retail dynamics. The strong Hong Kong dollar has further influenced both inbound and outbound consumption, as noted by Inside Retail in April 2025, deterring tourist spending and encouraging locals to shop across the border. Despite government efforts such as multiple-entry visas and mega event promotions, Inside Retail in May 2025 reported that these measures have provided only limited relief, with retail performance still lagging behind pre-pandemic levels. Regional competition, particularly from Hainan’s duty-free zone, and evolving consumer preferences have reinforced the need for Hong Kong retailers to adapt, as discussed in Retail Asia in March 2025, with a growing emphasis on experiential retail and digital integration to remain competitive.

Hong Kong retail sales rise for third consecutive month