Personal health care chain Watsons said it will close its shop in one of Hong Kong’s major tourist locations on Thursday after leasing it for two decades, a sign of the retail industry’s struggle to survive a near-total absence of visitors during the pandemic.
Watsons, owned by tycoon Li Ka-shing’s CK Hutchison Holdings, said the closure of its large store at Star House in Tsim Sha Tsui, a popular shopping destination, was because the pandemic had “severely affected the local economy and customers’ lifestyles”.
“The number of tourists visiting Hong Kong saw a drastic drop of over 90 per cent. Our business is affected, especially the stores in tourist areas with high rental costs,” said Watsons Hong Kong in a written reply to the Post on Wednesday.
Watsons paid more than HK$1.5 million a month for the 4,200 square-foot space, according to sources.
“Now the landlord has cut the asking rent by 46 per cent to HK$800,000 a month as it offers the space on the market,” said one source, who did not wish to be identified.
Watsons operates around 200 shops in Hong Kong and Macau, of which over 50 have in-store pharmacies.
Knight Frank said the city’s retail industry had been hit hard by the anti-government protests of 2019, and the Covid-19 pandemic that immediately followed them.
International brands such as Gap, Topshop, Victoria’s Secret and Esprit have either reduced the number of stores they operate or exited Hong Kong altogether.
Retailers that rely heavily on mainland Chinese and other tourists for sales in Hong Kong have found themselves unable to sustain business operations after the city essentially closed its borders early last year to combat and contain its coronavirus outbreak.
Visitor arrivals dropped by about 98.5 per cent in the first eight months to 53,226, from 3.54 million during the same period of 2020, according data from the Hong Kong Tourism Board.
“At present, the retail leasing market is dominated by local food and drink operators who are looking for 2,000 square feet with monthly rental of about HK$150,000 to HK$200,000,” said Helen Mak, senior director and head of retail services at Knight Frank.
Retailers’ expansion plans are still firmly on hold while former tourist districts remain no-go areas. “Most brands continue to value the security of malls and are reluctant to return to the high street,” said Simon Smith, senior director of research and consultancy at Savills, in its Hong Kong retail leasing report for October.
“In the short-run, the second instalment of the government’s consumption voucher scheme which was disbursed on October 1 will further boost local consumption and benefit the suburban retail market.
“Core areas including Tsim Sha Tsui, Mong Kok and Causeway Bay will continue to suffer until borders reopen.”
Leasing activity in core locations remains largely subdued except in Central which continues to benefit from its reliance on high-end local demand, according to the report.
Watsons said it has been reviewing its business operation and efficiency during the pandemic and adjusting the distribution of its stores in different districts, especially in tourist area.
“This alignment is to meet our customers’ needs on health, wellness and beauty by providing them with a reliable and personalised O+O (Offline plus Online) customer experience,” said Watsons.Internet Explorer Channel Network