The bustling streets of Hong Kong are witnessing a new trend as the city embraces the post-pandemic surge in cross-border consumption. In response to Hong Kongers’ enthusiasm for shopping in the north, many mainland brands are establishing a presence in Hong Kong, aiming to attract customers and prepare for future expansion into overseas markets.
With the easing of travel restrictions between Hong Kong and mainland China, tourists from both sides of the border have flocked to each other’s regions in unprecedented numbers, which generates a significant economic boost on both sides of the border.
According to data from the Hong Kong Immigration Department, approximately 486,000 visitors from Mainland China entered Hong Kong during the public holiday from September 30 to October 2 this year. In contrast, the number of Hong Kong residents traveling north to the mainland was even higher, reaching around 600,000.
In the wake of relaxed border controls, a surge in northward tourism has been met with an enthusiastic response from the retail sector. Hong Kong’s renowned shopping districts are bustling once again, with a notable increase in mainland visitors. Simultaneously, the phenomenon of “reverse purchasing” has taken hold, as Hong Kong locals venture north, returning with goods that signify the interconnectedness of the two economies.
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Bao Shi Fu, a Chinese-style specialty pastries shop, is one of the most representative foods that Hong Kongers buy back from Shenzhen. The anticipation surrounding Bao Shi Fu’s planned new store in Hong Kong next year has generated significant social media buzz, pointing to the growing influence of these brands.
Amid this resurgence, mainland brands are seizing the opportunity to expand their footprint. Stores like Cutti Coffee and Lamheungling Lemon Tea are now commonplace, signaling a broader trend of mainland businesses eyeing Hong Kong’s strategic position to elevate their global standing.
The Price War Phenomenon
The price difference is a key reason for Hong Kong people to buy food in Shenzhen, due to the relatively cheaper labor costs and rental expenses in the mainland. Therefore, many Chinese brands use a similar strategy in Hong Kong to attract consumers.
An aggressive pricing strategy is being employed by newcomers such as Cutti Coffee, which has made headlines with its 10HKD coffee promotion. This approach echoes the disruptive tactics of mainland success stories like Luckin Coffee, which once challenged Starbucks’ dominance in China.
As Cutti Coffee carefully considered its first location in Hong Kong, it chose the retail store next to Sheung Wan station. Around noon on working days, many white-collar workers who work nearby gather here, waiting for their coffee. Most coffee is ordered online and picked up.
I hope those mainland brands can bring down the prices of coffee in Hong Kong!” said a mainland tourist, who wished to remain anonymous.
She discovered the shop through social media and specifically visited mainland coffee shops to snap some photos.
Hong Kong locals echo this sentiment, welcoming the affordability.
Having access to cheaper coffee options is a delight. I can order online and grab a coffee on my way back to my office,” remarked Jeremy Ng, 32, whose office is just a 6-minute walk from the shop.
Comparatively, the Starbucks and Flash Coffee at the next corner have very few people waiting for their orders.
With these new ventures predominantly located in high-traffic areas like Tsim Sha Tsui, Mong Kok, and Causeway Bay, they are strategically positioned to capitalize on Hong Kong’s vibrant mix of locals and tourists.
The main reason for the recent trend of mainland dining brands venturing into Hong Kong this year is economic. Besides the low rental prices in Hong Kong after the pandemic, they also value Hong Kong’s superior international status. They hope to enhance their visibility through this platform and subsequently expand into overseas markets.
What’s the Future?
However, the sustainability of the price war strategy is in question, given Hong Kong’s high operating costs. The initial success of these businesses is promising, yet as prices inevitably adjust to market norms, maintaining customer loyalty could pose a challenge.
Maners Coffee, located within the upscale mall in Causeway Bay, prices its coffee similarly to typical coffee shops in Hong Kong and does not attract many customers.
Before the pandemic, Heytea, another mainland drink brand, captivated over a hundred Hong Kong residents at the opening of its flagship store. However, the initial excitement waned, and the number of Heytea branches in Hong Kong has since dwindled to two.
As this new wave of consumer interest begins to settle, the future balance between local and mainland brands remains uncertain. While current trends suggest a symbiotic relationship, the long-term impact on Hong Kong’s distinctive retail landscape is still unclear.
The Chairman of the Hong Kong Seedling Society and owner of Kam Kee Café, Hui Man Wai, expressed to HK01 his concerns during the Chung Yeung Festival holiday. He noted a downturn in business as many families left the city for ancestral worship. He fears that even if mainland brands establish branches in Hong Kong, residents may continue patronizing their mainland locations, potentially leading to the closure of their Hong Kong counterparts.
Feature Image Caption: People have lunch at Yang Guo Fu Mala Tang at Central. (Photo: Li La)