Hongkongers flock to Shenzhen's megastores: How can city retailers beat the competition?

Over the past weekend, we’ve seen bargain hunters flock to Shenzhen’s newly launched megastore Costco to snap up cheap deals ranging from sets of luggage to strawberries and croissants. In fact, there has been a noticeable trend of more Hong Kong residents visiting mainland China over the past year since the reopening of borders.  

According to data from the Immigration Department, Hong Kong residents made more than 53.3 million departures in 2023 to mainland China. However, mainland Chinese visitors made 26.5 million visits to Hong Kong, which is approximately half of the number of departures made by Hong Kong residents. 

This is also coupled with a survey conducted by Shenzhen Retail Business Association (深圳市零售商業行業協會) states that the preferred shopping places among Hongkongers to spend in Shenzhen are mostly shopping malls and large supermarkets, accounting for 78.10% and 60% respectively. Meanwhile, Hongkongers spend most on catering, followed by shopping and leisure. 

In a conversation with MARKETING-INTERACTIVE, Peter Shiu, a member of the Legislative Council (wholesale and retail), said that this shift was primarily driven by the significantly lower costs associated with transportation, drinks, meals and hotels in mainland China compared to Hong Kong. 

As such, expanding visitor sources to attract more high value-added overnight visitors has all along been one of the key strategies for developing Hong Kong's tourism, said Kevin Yeung, secretary for culture, sports and tourism, during a LegCo meeting on 17 Janauary.  

“Regarding various proposals to enhance IVS in an orderly manner and adjust the duty-free allowance of the Mainland visitors arriving in Hong Kong, the government will continue to maintain communication and discuss with relevant mainland authorities in due course to provide mainland visitors with flexible ways to visit Hong Kong and enriching travel experience to facilitate the vibrant development of tourism-related industries,” he added. 

Which retail sectors may be affected most? 

Given that many of the Hong Kong residents are opting for short leisure trips to mainland China, industry players MARKETING-INTERACTIVE spoke to agreed that this will impact Hong Kong retail sector in the long run. 

Local small F&B outlets will be affected most especially if they are catering to Chinese cuisines such as barbeque meat and hotpot, according to Xen Chia, strategic marketing director, XGATE. “These types of restaurants and small eateries are plentiful in Shenzhen. Not only are they price competitive, but they also offer comfortable dining environment and good customer service,” he said. 

Beyond the price factor, restaurants in Shenzhen are also now reputed for their higher quality of service as compared to Hong Kong, adding to the overall appeal for Hong Kong residents, said Charlene Ree, founder and CEO, EternityX. 

“In Hong Kong, due to a labour shortage and higher talent acquisition and retention costs, restaurants are often understaffed, which is more likely to result in less than satisfactory services,” she added.  

On the other hand, the local luxury sector could potentially be impacted, largely driven by strong customer relationship management (CRM) strategies in China retail stores, which helps foster a sense of local store loyalty among Chinese consumers, Ree added. 

Moreover, the planned conversion of Hainan into a free trade port by 2025 is expected to further intensify luxury retail competition with Hong Kong, according to Ree. 

How can brands transform their retail marketing strategies to attract mainland shoppers? 

With mainland China remaining the largest visitor source market of Hong Kong, brands in Hong Kong should transform their existing retail marketing strategy to engage with mainland shoppers and foster customer loyalty. 

Don't miss: HKTB: Mainland China remains largest visitor source market for HK

While many retail brands have already adopted Chinese social platforms Xiaohongshu, WeChat and Douyin as part of their marketing mix over the past few years, establishing a brand's own private domain traffic is another powerful method to seamlessly integrate online and offline channels, said EternityX’s Ree.  

"By doing this, luxury brands can gain access to valuable customer data and enable personalised marketing campaigns, customised product offerings and improved customer experiences based on in-depth consumer insights," She said. 

Luxury brands can also adopt Key Opinion Sales (KOS) marketing strategies, which are popular in the luxury industry in China, Ree said. “Luxury brands with physical stores in Hong Kong should consider putting more effort into training their salespeople and establishing their social media presence to entice Chinese consumers.” 

From a cross-border perspective, retail brands need to focus on designing quality products, creating exceptional customer experience and establishing a more regional or international brand position to attract mainland consumers, XGATE’s Chia said. 

Further echoing Chia’s views is Tim Durgan, VP, strategy & insights, APAC, Assembly, who said that branding would play a critical role in 2024 as the GBA initiative developed and more mainland consumers are seeking enhanced brand experiences and engagements.  

“From a media perspective, this also means that brands need to start looking into increasing their investments and activities in Mainland Chinese platforms such as Xiaohongshu, WeChat and Weibo, creating engaging, relevant and unique organic or paid content to attract consumers,” Durgan said.  

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