Based on a networking event offered by The Hong Kong Trade Development Council in Sydney to assist retailers in exploring business opportunities in Hong Kong and mainland China.

Bonnie Shek, director Australia & New Zealand HKTDC said that Hong Kong’s population of 7 million includes 350,000 expats and that the country operates under the ‘one country/two systems arrangement, retains a free flow of information and offers a level playing field for business. It is the world’s 12th largest trading economy.

Nielsen data shows that HK consumers are the most impulsive shoppers in Asia and affluent, high net-worth individuals, while China has a growing middle class of around 200 million. Other benefits are: Chinese mainland consumers make up the largest percentage of visitors, have a growing demand for imported wine (up 60%), have health/food safety concerns, and HK has no VAT as in China (13-17%).

HK is also a gateway to the nearby Pearl River Delta Region, which is home to the Chinese mainland’s wealthiest consumers and highest spenders. The region includes Macau, Shenzhen, Guangzhou and the cities of Shanghai and Beijing, while there are growing infrastructure links between PRD and Hong Kong with around 60,000 factories in PRD owned by HK companies.

Ms Shek said price retailing was still prevalent in grocery channels with intense competition between packaged food and beverage companies, internet usage was high, while online retail purchase are slow due to HK being such a small place and as consumers value the shopping experience. Total visitor arrivals grew by 23.1% in the six months to June 2010.

Private labels are about 5% of sales and mostly limited in grocery. Three years ago the HK government abolished wine duty and sales grew by 40% in first year and more wine specialists opened such as Voi La! A mandatory plastic bag levy was introduced in July 2009 for supermarkets and convenience stores. Retailers are introducing green building initiatives, while Dairy Farm supermarkets have a ‘Little green ambassador’ scheme that encourages children to work with parents to reduce use of plastic bags.

Opportunities are being helped by positive economic growth, increasing visitor arrivals especially from China and expected good growth in value, while challenges are rising rental costs, staff training, and high operational costs such as more regular store renovations due to the high standards expected. The HKTDC also offers a customer Matching Business Partner Service to connect with suppliers.

Cameron Boardman, head Australia and NZ for Invest Hong Kong said HK is ranked 5th in the current Global Cities Index as a desirable destination and there are two significant factors why HK is booming: the population is 7 million people but HK has 36 million visitors, with most coming from China (22.47m) and tourists are forecast to reach 57 million in 2020, with Chinese visitors coming to shop; HK has a low and simple tax system with no VAT/GST, quotas or tariffs and get products FOB on shelf, while HK is cheaper than Australia due to lower wages and compliance so products can get on the shelf at better price points. Average rents per sqm per month are up to $HK1310-1386, while shopfits have to be amortized to 2-3 year leases.

Supermarket sales were up 16.5% in January 2011 (9.4% year-on-year) due mainly to the Chinese New year practice of gift giving with sales for food and alcohol up 13.6%. Gift giving is tax deductible for corporate customers and in the hospitality market, sales are much higher, Mr Boardman said.

Leading regional retailer Dairy Farm operates Wellcome supermarkets and Mannings health & beauty stores in Hong Kong, while retailers and suppliers are using Hong Kong to launch into China. Those operating concept stores in HK include Australia’s Jurlique with 16 stores, and Jasmin Skincare.