Can the launch of SOGO Kai Tak redefine HK's retail landscape?

With Hong Kong's retail sales plummeting for the eighth month straight in October, falling by 2.9% YOY, the recent opening of department store SOGO in Kai Tak has become the latest talk of the town as to whether it can help redefine the city's retail landscape.

As SOGO Hong Kong’s first store expansion in a decade, the store will feature over 480 brands, including 22 renowned labels making their Hong Kong debut. It boasts East Kowloon’s largest beauty and skincare selection at over 110 brands and the largest baby mart with over 120 brands. 

Don't miss: Lifestyle International unveils The Twins Tower I and SOGO at Kai Tak

SOGO Department Store has long been an active participant in the Hong Kong retail industry, and the Causeway Bay store will celebrate its 40th anniversary next year, according to Thomas Lau, chairman and executive director of Lifestyle International. 

“SOGO is not just a one-stop shopping department store, but also a trustworthy brand for consumers. We believe that as large-scale projects in the Kai Tak area are completed and new residents move in, the commercial activities in the area will flourish, and SOGO will bring assured quality and greater convenience to those living in Kai Tak and the surrounding communities,” he added. 

Hiroto Taguchi, president and COO of SOGO & SEIBO, said: “Our longstanding partnership with Lifestyle International has been instrumental in our success, and we see a bright future ahead as we continue to innovate together. The Hong Kong market offers immense growth potential, especially with the opening of the new SOGO Kai Tak Store, which allows us to reach a diverse customer demographic. The strategic design of this new store ensures SOGO remains relevant to both mature and younger customers with varied consumption habits.” 

Media intelligence firm CARMA saw over 2,000 mentions online since the launch of the department store on 15 November. Of these, 27.9% carried positive sentiment, while 7.5% were negative.

Many positive mentions came from netizens eager to explore the new SOGO at The Twins, as well as from promotional campaigns by various brands aligned with the launch, said Charles Cheung, CARMA's HK GM. "Some discussions also centred on whether the opening of SOGO might positively influence housing prices in Kai Tak or the broader East Kowloon district."

Impacts on Hong Kong’s retail industry 

Industry players MARKETING-INTERACTIVE spoke to believed the launch of the new SOGO store is a wise move to boost local consumption. 

With the launch of new SOGO The Twins, it can attract significant foot traffic and spending, contributing to a general increase in retail sales, particularly in the East Kowloon area, according to Augustin Chan, director, GOAT, GroupM.  

“It can also elevate the retail landscape of Kai Tak, attracting other retailers and businesses to the area, creating a more vibrant and diverse shopping destination. This is very important for Kai Tak which is a newly developing area,” he added. 

SOGO Kai Tak's arrival heralds a potential retail renaissance in East Kowloon, said Shufen Goh, principal and co-founder, R3, said as a key anchor of the revitalised Kai Tak district, the store’s diverse range of brands and strong focus on consumer experiences such as beauty havens and baby marts is expected to draw both local and international shoppers. 

On the other hand, the move very clearly signals a shift from the focus of high-end retail being around the Harbour towards a mainland axis that goes from Shatin to Tsim Sha Tsui and now includes Kai Tak, said Celine Nikolakopoulou, APAC regional business director, Havas. 

“There will be fewer reasons to venture on HK island for those living in Kowloon, the New Territories and even Shenzhen.” 

A mega mall of this scale is sure to capture attention and attract shoppers, however, Xen Chia, strategic marketing director, XGATE, said given the current slow economy and the trend of Hong Kong consumers shifting their spending to Shenzhen, the opening of Sogo Kai Tak could result in market saturation and dilute sales among retailers in Hong Kong. 

An additional touchpoint to expand advertisers’ reach 

On the advertising front, Hong Kong ad spending saw a 2.6% YOY increase in Q3 2024, reaching HK$7.68 billion, according to admanGo. Driven by strong growth in ad spend from industries such as F&B, travel and tourism services, local ad spend increased by 7.5% YOY in July and grew by 5.6% YOY in August.  

Don't miss: How HK brands can maximise ROI with limited budget in 2025

Combined with the upcoming festive season, advertisers are expected to allocate more resources to promote business growth, leading to continued expansion of local ad spend.   

The launch of SOGO Kai Tak is indeed an additional touchpoint that expands advertisers’ reach, particularly as the physical store still plays a pivotal role in fostering brand communities, by hosting events, workshops, social happenings and cultivating a sense of belonging and shared interest among customers that cannot be replicated online, said Havas' Nikolakopoulou. 

For advertisers, this fresh hub presents a unique opportunity to reach a captive targeted audience, said R3’s Goh. “The store's innovative design, coupled with the district's evolving infrastructure, provides a dynamic backdrop for creative and localised campaigns.” 

“Broader economic factors and shifting consumer preferences continue to shape Hong Kong's retail industry, but SOGO Kai Tak's strategic location and compelling offerings position it as a catalyst for growth.” 

Although Kai Tak may not be a prime area to consider when it comes to OOH advertising, the launch of SOGO Kai Tak offers a prime location for advertisers to reach a large and diverse audience, said GroupM’s Chan.  

“In-store advertising, outdoor billboards, and digital displays within the complex provide valuable opportunities for brand visibility. The high foot traffic expected at SOGO Kai Tak translates to greater exposure for advertisements and increased opportunities for customer engagement.” 

While the store is unlikely to singlehandedly reverse Hong Kong's retail downturn, it represents a strategic investment in the city's retail future and offers a positive outlook for advertising and marketing, added Goh.

However, the initial excitement may not last long and is likely to fade by March next year, following the festive season, and SOGO Kai Tak will soon need to rely on its new retail marketing strategies to maintain foot traffic, said XGATE’s Chia. 

“Key factors for success will include the mall's ability to implement experiential shopping—such as events, performances, and interactive technologies—alongside effective omnichannel marketing that offers personalised customer experiences, whether buying in-store or online,” he added. 

To encourage Hong Kong residents to shop locally, retail malls must strengthen partnerships and collaborations with brands, he said. “Additionally, working closely with Hong Kong tourism and regulatory bodies will be essential to attract visitors and restore confidence in the tourism sector, helping to reestablish Hong Kong as a shopping paradise.” 

Related articles:

Lifestyle International seeks to privatise Sogo for HK$1.88bn
Are industry players optimistic about the growth of HK ad spending in 2024?