The View from Hong Kong-Hong Kong Market

We’ve been getting orders from the U.S. mainly from TV shopping network companies and some online companies. 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 Gaurav Nigam, Oriental GemcoThe slick city has been back in action for over couple of months now. Hong Kong is one of the densest cities in the world with high rises literally stuck to each other. The transportation is almost always packed to the brim. Some of the best restaurants in Hong Kong barely have space for people to move around. Be that as it may, this financial hub whose efficiency and skill many countries world over are dependent on, managed to beat the virus and its resurgence as well, thanks to its citizens. Perhaps it was the experience from SARS and many other epidemics before that, the people of Hong Kong are definitely equipped to handle a pandemic of this scale better than most countries – they are organized and have a sense of self-discipline, so much so that even when the Government banned masks, Hong Kongers went onto wear masks, distributing them and encouraging fellow citizens to wear them.

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.

I know of a retailer who has created a bench jeweller concept for consumers to build, repair, and/ or polish their rings as a touch of personalization. These are creative ways in which retailers are expanding beyond conventional methods Harsh Maheshwari, Kunming DiamondsJewellers are working on pending orders as parts of U.S. are opening up. However, India opening up remains crucial to Hong Kong jewellery industry’s health as it is the sourcing hub – if India doesn’t open up, it will heavily affect the supply chain and operation will not be smooth.

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.

The Government has 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. India opening up is crucial as it is the hub of sourcing. There will be major issues if India doesn’t open up as supply chain will get affected Zulu Ghevriya, Prism GroupPrimed for innovation
When the going gets tough, the tough gets going. Hong Kong has been a centre for gems and jewellery for many years and businesses have gotten complacent – a dose of innovation was much needed. Due to this pandemic, people are slowly beginning to get creative. However, many business owners are happy with being busy tending to customers who are coming in or having some enquiries. Basic pieces were getting sold off the shelves, now people want to think outside the box. Some retailers are even clearing out some of their merchandise to make room for some sort of seminars and educational programmes for people. ‘‘I know of a retailer who has created a bench jeweller concept for consumers to build, repair, and/or polish their rings as a touch of personalization. These are creative ways in which retailers are expanding beyond conventional methods,” adds Maheshwari.

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.