Hong Kong retailers are preparing a platform to develop cross-border e-commerce as they aim to offset the pressure of declining sales.
The value of total retail sales in the first half of 2015 fell by 1.6 percent compared with the same period in 2014, according to a report by the SAR's Census and Statistics Department.
Further, the value of total retail sales dropped by 4.4 percent in the second quarter of 2015 compared with the preceding three months, while the volume of total retail sales shrank by 3 percent.
The most marked drop was in the sales value of high-end items like jewelry, watches and clocks, and valuable gifts, which fell by 10.4 percent year-on-year in June.
In order to cope with the slide in sales, many traditional Hong Kong retailers are looking to explore cross-border e-commerce.
"A platform is needed to ease the pressure for small and mid- sized traditional retailers, who, as far as I know, are eager to embrace cross-border e-commerce but are hesitant because they are unfamiliar with regulations on the mainland," Liu Shaohua, president of the Hong Kong Cross-border E-commerce Association (HKCEA), told China Daily.
Liu said that such a platform is under construction and it will provide consolidated access for Hong Kong retailers to mainland customs and logistics, greatly cutting time and capital spent in clearance and delivery.
Industry experts believe that traditional retailers have an edge over purely e-commerce companies because of their product sources.
Victor Guo Zengli, president of the China Shopping Center Development Association of Mall China, a Beijing-based shopping center information provider and cooperation promoter, said: "The key to cross-border e-commerce is production sources. Online or offline is just a matter of channel ... Compared with e-commerce companies, traditional entities have more advantages when they integrate business models of physical stores and e-commerce."
And it is not just small and mid-sized retailers who are striving for change, several retail giants in Hong Kong have also joined the fray.
Mannings is one of them. Xu Tao, executive director of Mannings China, said in Guangdong last Friday that the company has already reached an agreement on general intention of cooperation, even though he did not disclose the identity of the partner.
Another retail giant, Chow Tai Fook Enterprises Ltd, won the bid to develop the 11,000 square meter Qianhai (Hong Kong) Global Shopping Center and intends to integrate online and offline retailing services after it posted a 6-percent drop in sales for the second quarter this year.
Adrian Cheng Chi-Kong, enterprises director at Chow Tai Fook, said: "We will develop intelligent services in the mall using innovative electronic technology and deploy cross-border e-commerce as a hub to provide consumers with a diversified shopping and leisure experience."
Last month, Hong Kong-listed China Resources Vanguard (CRV) teamed up with China Merchants Holdings (International) Co Ltd to open a cross-border e-commerce experience store in Qianhai.
The store, named eWJ Shop, is the fourth offline experience store using cross-border e-commerce in the special economic zone. The 500 sq m store sells snacks, imported fruits, maternal and child supplies, and other Hong Kong products.
CRV said that the demand for Hong Kong products is huge, and they will keep expanding the market by developing cross-border e-commerce in the next two to three years.
That these traditional retail giants have chosen to set up e-commerce bases in the Guangdong free trade zone (FTZ) is not a coincidence, but the result of strategic consideration.
The Qianhai and Shekou area, Shenzhen's share of the Guangdong FTZ, has developed into a cross-border e-commerce industry eco-cluster.
HKCEA's Liu said bonded port areas and FTZs are ideal places to launch a retail business. "Choosing these areas to store cross-border products will save at least a third of their costs in tax, rental, logistics and labor," he said.
Within the cross-border e-commerce pilot zone, products with import duties of less than 50 yuan ($7.91) are tax exempt under the mainland's preferential trade policy.
Last month, the Shenzhen government released a document to set up "single access" for all e-commerce trading, meaning e-commerce traders can complete customs clearance, inspection and quarantine, foreign currency management, tax and logistics through a single website.
As for logistics, previously retailers would import a goods container into the bonded zone and transport it to the buyers' locations. But under the B2C (business-to-consumer) e-commerce model, they can leave products in the bonded zone and send them out to customers by express delivery, with the delivery fee to be paid by the individual recipients.
In the first half of this year, Qianhai Bay Bonded Port Area attracted 68 import e-commerce companies with more than 7,000 categories of products worth 331 million yuan.
Cross-border e-commerce platform is a win-win arrangement for Hong Kong retailers who are hit by sluggish sales and mainland consumers whose demand for Hong Kong products is huge. Such a platform should provide consolidated access for Hong Kong retailers to mainland customs and logistics, greatly cutting time and capital spent in clearance and delivery, experts say.
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