Life is back to normal today, with restaurants, bars and stores having opened up late June. However, people are erring on the side of caution with social distancing norms in place. It has been a cruel year for Hong Kong – a bustling city with thriving economic activities has been subject to one blow after the other. The pro-domestic protests that engulfed the city in 2019 are still ongoing and the threat of the virus brought the city to a standstill for nearly 3 months. The imposition of National Security Law might spark more confusion and trouble for the business community in Hong Kong. One of the biggest revenues for the city is tourism, which has been badly hit since March and with the government imposing restrictions on foreigners flying into the country, it looks like tourism will remain affected for the foreseeable future.
An export driven market
Hong Kong depends on the exports
mainly, especially China, U.S. and the
Middle East. The Middle East has been
in a complete lock down and business
from the region is nil. “We’ve been
getting orders from the U.S. mainly from
TV shopping network companies and
some online companies. China has also
completely opened up, so we are getting
steady demand from there as well,” says
Gaurav Nigam of Oriental Gemco. The
survival mode for the jewellery industry
in Hong Kong right now is entirely
through opportunities they are getting
from China as well as the U.S. Until
April, businesses in Hong Kong were
badly hit because of logistical issues and
exports were definitely down and India
being shut completely obviously didn’t
help. Markets started opening up in May
and in June, the market started slowly
picking up. Of course, the market isn’t
booming but it is not all that bad because
all major hubs of jewellery and diamonds
like Antwerp, New York and some parts
of Asia are all open and Europe will
fully open up mid July. “We went into lockdown end of January and before that
we were shut because of Chinese New
Year. We also had the protests, so Hong
Kong has been through a lot. China is
doing extremely well. We don’t have a
presence there but our clients from the
U.S. and Europe who have stores in China
tell us that on some days they have had
record breaking sales. This sentiment has
not trickled into Hong Kong as yet. We
are hearing that the borders will open up
in July, may be things will start looking
up then,” says Harsh Maheshwari of
Kunming Diamonds. The jewellery
market in Hong Kong is at least 70 per
cent down.
Retail needs resurgence
Closure of Mainland border due to
Covid-19 has affected retail sales in
Hong Kong to a large extent as the city
largely depends on inflow of tourists from
China and anywhere else in the world.
Jewellery and watch sales plummeted by
69.7 per cent to HKD 2.02 billion ($261
million) in May. HK’s largest jeweller
Chow Tai Fook reported a 36.6% drop
in profit but is still optimistic about
demand in Mainland China. The retail
giant is planning to close at least 10-15
stores in HK and Macau, however, as
demand from China seems to be steady,
the company plans to expand using the
franchise model, aiming to open 400-
450 more points of sales by the end
March 2021. Retailer Luk Fook is also
struggling. The decline of same-store sales in the first three weeks narrowed to
around 60 percent, while overall shops in
the mainland market showed progressive
improvements with a less than 20-percent
decline in June as compared to the
20-per-cent drop in April to May and
40-per-cent drop in March. The retailer
will close five stores in Hong Kong and
open two in Macau.
Many retailers have negotiated with their landlords – their rents have been significantly cut to tide through the current period. “For most retailers around the world, things are looking bad and Hong Kong is no different. When we ask for payments they want to return the goods. But we are cooperating with them. We are being patient and extending the credit by six months. I do believe that nothing will change before second quarter of 2021. So, if retailers don’t get support from suppliers and owners of the place they are renting, they won’t be able to survive,” says Nigam.
Another big setback
The Hong Kong jewellery show, one of the
biggest jewellery events in the world has
been cancelled and this is a major setback
for the jewellery market in Hong Kong. It
is a place where serious business takes
place and this will further lead to downfall
in business numbers, especially for small
and medium businesses. “Established
businesses are able to maneuver through
this crisis and conduct business through
Zoom calls because they already have a network of clients,” says Maheshwari..
Also, dealing with a niche product like
fancy colour diamonds has given him an
edge. “There’s always been a scarcity in
natural coloured diamonds, but it’s even
more prevalent now. Being a stockist with
a global footprint, we have an advantage
in acting swiftly and delivering on time,”
he adds.
HK Government to the rescue
All said and done, the Hong Kong
government has been extremely
supportive to business owners in rolling
out financial aids and relief packages to
both small and medium scale businesses.
“They understand that the market has
been affected. They have given subsidies
and salary packages to support the
employees. They have given $9000 to
each employee in Hong Kong every
month, this will continue for 6 months,”
says Zulu Ghevriya of Prism Group.
This move has been initiated to ensure
there are no layoffs. The belief and hope
in HK’s business prowess is strong and
undeterred even with coronavirus. The
government is encouraging business to
fully go digital and they are completely
funding any digital initiative undertaken
by companies.
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