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Friday, March 27, 2020, 01:58
Clawing back a living in an 'ice age' for retailers
By Pamela Lin
Friday, March 27, 2020, 01:58 By Pamela Lin

A woman wearing a hat, a face mask and a face shield to protect herself from the novel coronavirus walks past a claw machine arcade in Tseung Kwan O. (CALVIN NG / CHINA DAILY)

As retail, catering and other hard-hit businesses pull down the shutters in a city wracked by months of social unrest and the novel coronavirus pandemic, Hong Kong residents have been immersed in deep soul-searching to ride out what’s deemed to be one of toughest economic times on record.

Mounting rows of empty shops in some of the city’s best-known commercial and shopping areas have been the order of the day. The latest statistics from Midland IC&I speak volumes — the vacancy rate of retail shops in the four core shopping districts of Causeway Bay, Central, Mong Kok and Tsim Sha Tsui keeps going up, from 6.5 percent in the third quarter of last year to 9.2 percent in first three months of 2020.

“Hong Kong retailers have entered an ‘ice age’” was how Daniel Wong Hon-shing, executive director and chief executive officer of Midland IC&I, put it.

According to the agency, which specializes in industrial and commercial properties and shops, the total transaction volume of the city’s retail shops in the first two months of this year was down a staggering 40 percent from the same period in 2019. 

Businesses focused on local daily consumption and offering affordable prices will survive. For apparel or durable goods shops, getting online is one way to go through the bleak 

Edwin Lee Kan-hing, founder and chief executive officer of Bridgeway Prime Shop Fund Management

Besides being apprehensive about the local retail property market, Wong expects the value and rentals of shops in Hong Kong’s prime shopping districts to plunge about 40 percent this year, while those in residential areas could see drops of between 15 and 20 percent as operators run for cover.

Wong said some landlords have been forced to cave in, slashing shop rents by almost half to keep tenants or offering free interior construction to attract new occupants.

The gut-wrenching scenario, on the other hand, has brought a glimmer of hope to some who changed tack. Since the middle of last year, arcades with claw machines have sprung up like mushrooms, betting on a domestic response as tourists turn their backs on the city.

The advent of the claw machine market is fueled by sagging shop rents and low operation costs and expenses, said Wilson Tsoi, manager of claw machine arcade Big Bear, adding that most these premises can do away with interior decorations and they require little manpower. 

Big Bear, an early bird that went into operation in October 2018, currently has 14 shops scattered in shopping districts such as Causeway Bay and Mong Kok, and some residential districts in Hong Kong.

Normally, the shop owner would rent the premises from the landlord and installs the claw machines, which could then be leased to individuals for HK$4,000 (US$516) to HK$10,000 a month each. It would be up to the operator what to feed into the machines, Tsoi told China Daily. 

As a growing number of players tap into the market, Tsoi said Big Bear does not plan to expand at this stage, bearing in mind the stiff competition and current market conditions.

With strong mobility and low rents, claw machine arcades used to take up small corners in shopping malls, but now they’ve gone big onto the streets to lure more customers, cashing in on light operating costs, said Wong. Maybe, when the market recovers, they’ll move back to shopping malls, he added.

Edwin Lee Kan-hing, founder and chief executive officer of Bridgeway Prime Shop Fund Management, said another factor that has lifted the claw machine business is the increase in the trading of secondhand dolls online.

Some people sell the toys or garage kits they’ve clipped from the machines and see it as a way of making some money, he explained.

Requiring a certain degree of skill, grabbing a doll from a claw machine can be challenging. The operators have blazed a new trail by placing trendy or niche products into the machines and creating newfangled ways for players to try their luck. 

However, the dolls, toy models or any product placed in the machine should not be valued at more than HK$300 each under regulations for the Amusements with Prizes License. Besides, claw machine arcade also need to apply for a license from the Licensing Authority. 

Some operators, nevertheless, may have gone overboard by placing substitutes for high-value prizes in the machines as an incentive to draw players. They would then allow players to exchange the substitute for higher value prizes.

Besides claw machine shops, nursing homes, take-away catering services, disinfectants and anti-pandemic products have also clawed their way into the slack market.

Shift in property market

Hong Kong is confronted by an aging population, with nursing homes in demand. Wong said that previously, operators of nursing homes would bid for space with Cantonese restaurants that usually take up several floors and were willing to pay more to win the bid. However, as some Cantonese restaurants have closed down, premises have become more readily available in the market. 

The soured business climate has led to a major shift in the commercial property market, particularly in Causeway Bay — one of the world’s most expensive shopping and tourist hotspots, filled with luxury boutiques and upmarket malls. 

Some of the biggest names in the global retail scene, such as Prada and Louis Vuitton, are deserting the area, citing plummeting fortunes in their operations. Jewelry and watch shops are lining up for the door, while catering, beauty and barber shops that used to be tucked away in commercial buildings are considering taking up street shops, according to Wong. 

The current retail market reflects a sort of polarization that shops dealing in daily-life necessities are faring better than those peddling durable goods, especially in the prime shopping districts, as customers with big dollars make their exit from the market.

Although shop values and rentals are seen to be heading south significantly this year, Lee reckoned it might still be the right time for other businesses to enter the fray. 

“The higher the jobless rate, the higher the rate of business creation,” he said, adding that businesses focused on local daily consumption and offering affordable prices will survive. For apparel or durable goods shops, getting online is one way to go through the bleak, he said. 

A street shop owned by Lee and located at Sai Wan Ho on the northeastern shore of Hong Kong Island was leased to a charitable organization for selling and distributing anti-epidemic products for a token monthly rent of HK$1 for up to three months. The shop was rented out for HK$55,000 monthly before the coronavirus pandemic.

Lee said he hopes the shop can be used to help residents fight the virus, and will lease it out after the market turns the corner. 

pamelalin@chinadailyhk.com


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