The latest growth in retail sales hit 29% and 20.7% in value and volume respectively. We are optimistic about retail sales and our forecast for 2011 is above 25% growth over 2010. Thanks to the flourishing Mainland inbound tourism resulted from the agreement with the Chinese Government back in 2003 allowing Mainland residents from 49 cities to travel to Hong Kong as individual tourists. The policy remains favourable to the trade but we need to maintain our attractiveness and enhance tourism-related facilities to accommodate the increasing crowds of tourists, in particular, those from the Mainland. These include the development and enhancement of accommodation and transportation facilities. More importantly, the relevant authorities should regulate the industry malpractice as soon as possible to uphold the image of Hong Kong as a shopping paradise.

Tourism continues to play an important role and Hong Kong is facing keen competition from neighbouring countries such as Singapore and Taiwan who are opening up new tourist attractions to lure more travellers including the Mainlanders. This potential risk prompted the HKSAR Government to further relax relevant arrangement to facilitate the entry of Taiwan visitors for business or leisure. This new measure on the extension of stay that recently came into effect together with the arrangement for “prior entry registration”, both of which will likely boost traffic and contribute to Hong Kong-Taiwan exchanges.

Although the outlook of retail business for the whole year is expected to be positive, fellow retailers should remain cautious due to uncertainties in the coming year. Despite the encouraging growth in retail sales, retail volume has been shrinking since early this year, which is a reflection of growing inflation. We have also seen our daily needs such as food are suffering negative volume growth. Sentiments could be a challenge due to stock market volatility and weak land auction results in recent months. The economic and fiscal condition of the US and the sovereign debt crisis in the Eurozone will no doubt pose threats to the global economy and we must stay alert at all times notwithstanding the fact that the seasonally adjusted unemployment rate went down to 3.2% from the previous 3.4%.

As you are well aware, there is continuous high demand for retail space in prime locations for retailers targeting tourists who visit Hong Kong for shopping. You may wish to learn that two major streets in Hong Kong ranked second and third most expensive retail corridors worldwide. The rent per square foot for retail space in these two streets is just behind New York’s Fifth Avenue. Rental remains the key challenge and this has brought much pressure to industry players not only in securing prime locations but also the second-tier ones.

According to the latest Government figures, the underlying inflation rate reached an all time high of 6.3%. Heightening inflation has largely increased the operating costs of retailers. To sustain the business, retailers have no choice but to increase product prices but at the same time take into consideration the need to carefully balance consumer expectation and competitiveness.

Since the implementation of the minimum wage in May, staff hiring has become more difficult for the labour-intensive retail and catering sectors. It is not surprising that people would choose to work for less tough jobs, such as security guards given similar wage level.

In addition to the abovementioned factors that have been greatly affecting retailers, Hong Kong is facing various challenges raised in the earlier consultations for the Chief Executive’s Policy Address and The Budget. Topics concerned include housing, ageing population, wealth gap …etc. For a better tomorrow, I urge members who have voting rights to vote in the coming Chief Executive and LegCo elections.

On major policies and legislations, the Association has continuously been communicating the trade’s views to relevant authorities. For the past few months, we attended the LegCo deputations and submitted views on the extension of Environmental Levy Scheme on Plastic Shopping Bags and the three Guidelines relating to the proposed conduct rules in the Competition Bill. Regarding the Environmental Levy Scheme, we in principle support the Government’s proposal to ban free distribution of plastic shopping bags and to extend the levy scheme to cover all retailers. A media conference was held to show our stance and to raise concerns on provisions of exemptions as well as retention of levy by retailers to reduce administrative burden especially for the small and medium-sized enterprises (SME).

With regard to the construction of the Third Airport Runway, we have already completed our submission. We took the opportunity to urge the Government to consider financing the project and undertaking immediate environment impact assessment.

Internally, the Service & Courtesy Award 2011 has undergone its second phase, the Preliminary Interview, which was held in an exciting atmosphere on 20 September. The Programme is now entering into the third phase with the Final Interview scheduled on 20 October. Winners of the campaign will then come out!

As for our other flagship project, Mystery Shoppers Programme, we have already completed all the assessments. We very much look forward to seeing the results of the Programme and sharing the joy with the award winners and those of the new award categories.

Following the successful application of the second SME fund, we rolled out a number of free services for SME retailers in the past few months. One of these was the SME Retail Conference. I am pleased to report that the said project ran exceptionally well on 21 July. This year, we registered a full house attendance. Prominent figures from major SME retailers accepted our invitations as speakers to share their success stories. They are Ms. Jane Tong, Managing Director of Arredamenti Co Ltd (Giormani), and Ms. Erica Yuen, Founder & Director of Mi Ming Mart and Kami Teapresso. On behalf of the Association, I would like to convey a note of thanks to them. I wish to let you know that our other SME-related services —Retail Workshops and Mystery Shoppers Programme also received overwhelming response.

Some of you might have attended the 28th Annual General Meeting cum Luncheon that was recently held at the JW Marriott Hotel. This is indeed an opportunity for members to gain a better understanding of the work and achievements of the Association over the past year. Our heartfelt thanks go to Mr. Y K Pang, SBS, JP, Chairman of Employers’ Federation of Hong Kong, who spared time out of his busy schedule to share his knowledge and valuable insights on the topic of manpower.

We are fast approaching the end of another year but a number of the Association’s major projects are still underway. Taking this opportunity, I earnestly request your support for these programmes. One of them is the Association’s Annual Ball to be held on 19 December. This is the first time that the Association has secured a bigger venue to accommodate the growing number of participating members and organizations. Your participation is crucial to its success.

Caroline Mak
Chairman
October 2011