Hong Kong’s retail sales dropped 11.8 percent year-on-year in July, marking a fifth consecutive month of decline amid shifting consumption patterns and a strong local currency.

According to the Census and Statistics Department’s announcement on Friday, the provisionally estimated retail sales shrank to HK$29.1 billion ($3.73 billion) in July, following a 9.7 percent decline in June and an 11.5 percent fall in May.

For the first seven months of 2024, total retail sales sank by 7.3 percent compared with the same period in 2023.

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A government spokesman attributed the continued decline to changing consumption habits, the strong Hong Kong dollar, and other factors, including increased outbound travel during the summer holidays.

Chinese mainland visitors accounted for over half of the total visitor arrivals to Hong Kong during the first seven months of the year. While mainland visitors in the past spent extravagantly in Hong Kong, today they prefer exploring cultural sites over shopping for high-end items.

Meanwhile, the relatively high exchange rate of the Hong Kong dollar against the renminbi has dampened their shopping and traveling desire.

“The retail sector will still face challenges in the near term,” the spokesman said, adding that government measures to boost market sentiment and promote a “mega event economy” should help stimulate retail businesses.

“Continued growth of the economy and rising employment earnings should also provide support to the retail sector,” the spokesman added.

Online sales, which accounted for 7.8 percent of total sales in July, climbed 1 percent year-on-year to HK$2.3 billion.

For the first seven months of 2024 taken together, it was provisionally estimated that the value of online retail sales dipped by 0.1 percent year-on-year.

Divided into categories, the sales value of sales of books, newspapers, stationery and gifts surged 26.1 percent in July from the previous year, while the value of sales of medicines and cosmetics jumped by 3.5 percent.

In contrast, the sales value of motor vehicles and parts plummeted 27.9 percent year-on-year in July, following a 25 percent decline in jewelry, watches, and valuable gifts, and a 24.9 percent fall in Chinese drugs and herbs.

The provisional estimate of the volume of total retail sales fell 13.3 percent year-on-year in July.

The spokesman pledged that the government will continue to help small and medium-sized enterprises, including those in the retail sector, to adopt ready-to-use digital technology solutions through the Digital Transformation Support Pilot Programme to accelerate their digital transformation.

“The government will continue to assist the local retail sector in upgrading and transformation,” the spokesman added.

The Hong Kong Trade Development Council launched the city's first month-long e-commerce shopping festival in August to bolster its beleaguered retail sector.

The initiative enables local SMEs to tap into Chinese mainland’s online shopping giants, such as Tmall and JD, leveraging these platforms’ extensive visitor traffic and diverse customer base, while providing them with practical experience in expanding into the mainland, the government trade body said.

In addition, the government introduced the “E-commerce Easy” project in July, offering SMEs up to HK$1 million in subsidies to set up online stores, advertise on third-party platforms, and develop mobile apps and online payment options.

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Allan Zeman, chairman of Lan Kwai Fong Group in Hong Kong, said, “Hong Kong products often carry a unique cultural appeal. Highlighting these products can attract consumers interested in distinct offerings that differentiate from local brands.”

Simon Lee, adjunct faculty of Shenzhen Finance Institute at The Chinese University of Hong Kong, said Hong Kong brands face fierce competition as they vie for market share against the Chinese mainland and international rivals.

“Yet (conducting livestreaming and advertising on Chinese e-commerce platforms) enables Hong Kong brands to have exposure to a wider audience as mainland people prefer to buy things through online platforms. Initial effectiveness is good, but further development depends on the quality of products and brands,” Lee added.

Contact the writer at tianyuanzhang@chinadailyhk.com