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Rising Chinese mainland market changes HK’s retail landscape

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During the recent two decades, Hong Kong benefited from a growing Chinese mainland market, which shifted from luxury spending to consumer items, an entrepreneur said.

"Significant changes have taken place in Hong Kong with regards to sectors including food and beverage, automotive and retail in the past 20 years. And the biggest single change is the retail landscape, which is probably predominantly driven by the wealth accumulation in the mainland," said Helmuth Hennig, managing director of Hong Kong-based marketing and distribution company Jebsen Group.

Hennig told the Global Times on Wednesday, "Things that are in high demand in the mainland significantly impacted Hong Kong, like baby milk powder, creating a huge market." 

"So what we see is the shift of the retail business moving more toward catering to mainland consumers and tourists, and less to the general tourists that we used to have in Hong Kong," he said.

With the development of new technology, the popularity of smartphones and mobile applications are significantly changing consumer behaviors. "In this respect, we see a lot of room for growth in online-to-offline commerce," Hennig noted.

Hong Kong companies also face some challenges when seeking growth in the mainland market. For example, there are huge differences in consumer habits across first-tier to fifth-tier cities as well as the vast size of the country geographically, according to Hennig.

But opportunities still exist, such as the high demand for domestic consumption thanks to the rise of middle class, he said, noting that meanwhile, Hong Kong has become a very interesting place for wealthy mainland consumers to either invest or look for financial services. 

Hennig also shared his views with the Global Times (GT) on what kind of roles Hong Kong enterprises have played in connecting with the mainland market.

GT: What are the most attractive fields to Hong Kong enterprises in the mainland market? 

Hennig: Because of the handover and China's opening-up, Hong Kong became the launchpad for many investors from overseas when it came to investing in the mainland. The Closer Economic Partnership Arrangement also gave Hong Kong and Hong Kong-based companies a competitive advantage.

The mainland is not a simple market to operate in. Although there is still a lot of potential thanks to the growing middle class, it is a very fragmented market with many different regulatory environments. 

Moreover, consumer expectations and behaviors vary greatly across the country and are becoming more sophisticated due to easy access of information through the Internet. For brands to go in directly requires commitment to make this work. All companies, including Hong Kong companies, should realize that a one-size-fits-all model may not be the most effective to achieve growth in the market.

GT: In what ways do you think the enterprises in Hong Kong and the mainland can learn from each other to maintain their market competitiveness? 

Hennig: In the past, Hong Kong looked at Singapore as its competitor, but now Hong Kong's competitors are mainly from the mainland, like Shanghai and Shenzhen in South China's Guangdong Province. I think Hong Kong needs to focus on is its uniqueness. It's an open and free economy. It's very easy to do business in Hong Kong with low taxes, and it is a multi-cultural city with high cultural tolerance. Rule of law, using common law as our basis, gives Hong Kong a different level of internationalism.

Mainland companies are looking go overseas, Western companies and other non-mainland companies are looking to enter the market. And to that, Hong Kong still has a significant role to play, but more on the intellectual side: legal, financial, trading, rather that logistics and so forth. And it's more about understanding the market.

——Article excerpt from《Global Times