Financial Times report: Shenzhen mall serves up Hong Kong shopping experience

As Chinese shoppers shun Hong Kong because of rising anti-­mainland sentiment, the city’s retailers are hoping for some respite with the opening of their own mall in neighbouring Shenzhen.
The RMB350m (USD54m) HOKO mall, built by Hong Kong’s billionaire Cheng family, is designed to give mainland consumers access to the foreign products and Hong Kong brands they crave without the hassle of crossing the border into the increasingly troubled semi-autonomous territory.
“This is much easier than going to Hong Kong where there are long lines at immigration, mainland people get harassed on public transport and it is not safe after the recent riot,” says Shenzhen resident Pan Meizhu, one of many Chinese shoppers who have been attracted by the Hong Kong-style shopping experience.
With floors named after Hong Kong shopping districts Causeway Bay, Tsim Sha Tsui and Mong Kok — site of an anti-government riot last month — the mall features some of the territory’s best-known brands, such as the Chengs’ Chow Tai Fook, the world’s biggest listed jeweller. Tenants also include shops selling health supplements and baby milk formula — must-buy goods for mainland visitors to Hong Kong who are suspicious of the quality of products sold in China.
Chan Sai Cheong, an executive at Chow Tai Fook, says foot traffic has been “better than expected” since the mall opened at the end of last year, and that there was strong demand from Hong Kong retailers to rent space in a second phase scheduled to open by May.
Retailers in Hong Kong, one of the world’s luxury goods hotspots, are facing tough times with December sales 8.5 percent lower than the same month last year as the number of mainland tourists continued to shrink amid political tensions and the relative strength of the Hong Kong dollar.
During the important Chinese new year shopping period, sales at Chow Tai Fook in Hong Kong and Macau slumped 23 percent year-on-year, while those of Sasa, a leading Hong Kong cosmetics chain that has a branch in HOKO, fell 20 percent.
The new mall, located in the pilot “free-trade zone” in fast-growing Shenzhen, is part of a Chinese government experiment to reduce the amount of money Chinese consumers spend overseas by offering tax reductions for companies using ecommerce to sell imported goods.
While some goods can be bought on the spot, to get tax discounts on foreign products, which can be as big as 17 percent for cosmetics, customers must buy goods using the mall’s mobile app and wait for them to be delivered several days later.
But analysts warn that on its own, the mall will do little to alleviate currency outflows from China or the woes of Hong Kong retailers.
After a golden era for Hong Kong retailers fuelled by a surge in luxury goods purchases by China’s emerging millionaires and billionaires, Jessie Guo, a consumer industries analyst at stockbroker Jefferies, believes there is “no reason to expect the magic to come back in the near term”.
She says that the HOKO mall is an interesting experiment but that it is “small scale compared with the huge market in Hong Kong and the even bigger market in the mainland”. Ben Bland, Shenzhen. MDT/FT Exclusive