Commuters travel past commercial buildings on a tram in the Central district of Hong Kong on June 21, 2021. (ANTHONY WALLACE / AFP)
The COVID-19 pandemic has accelerated the digital transformation of Hong Kong retailers and small and medium-sized enterprises as stringent social-distancing measures amid the fifth wave of the coronavirus have hammered the city’s economy, an accounting firm report says.
A survey from CPA Australia showed that 40 percent of the surveyed SMEs expect business growth this year, and 70 percent of them will or may introduce a new product, service or process this year.
In the survey, 40 percent of the surveyed SMEs said that improvement in profitability was due to technology investment in 2021. Over half of the respondents, 53 percent, earned more than 10 percent of their revenue from online sales in 2021, the highest result for the city since 2017.
With social distancing restrictions set to relax from mid-April and the rollout of stimulus measures such as the electronic consumption vouchers, small businesses should continue innovating, digitalizing and updating their business plans to ensure they are best placed to rebound in the second half of 2022.
Janssen Chan, chairperson of CPA Australia’s SME Committee-Greater China
CPA Australia’s 13th Asia-Pacific Small Business Survey, conducted in November and December, interviewed 4,252 small-business owners or managers, including 310 from Hong Kong, across 11 Asia-Pacific markets to understand their business conditions and confidence.
“The pandemic is a major catalyst for transforming business models and consumer spending patterns. In Hong Kong, more consumers are purchasing online and using digital payments. With social distancing restrictions set to relax from mid-April and the rollout of stimulus measures such as the electronic consumption vouchers, small businesses should continue innovating, digitalizing and updating their business plans to ensure they are best placed to rebound in the second half of 2022,” said Janssen Chan, chairperson of CPA Australia’s SME Committee-Greater China.
SMEs comprise more than 98 percent of Hong Kong’s business establishments, but most of them do not have a dedicated information technology (IT) department, and they lack technical support to enable them to go online.
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Larger companies that have established online stores or are even doing cross-border business should utilize data analytics techniques in a simple dashboard format to help them adjust their marketing inventory and logistics strategies, as well as better manage customer relationship management (CRM).
The professional accounting body recommends Hong Kong businesses increase their focus on online sales and new payment technologies, identify and adopt suitable technologies into their business, innovate through the introduction of new products, services or processes
CPA Australia recommends HK businesses increase their focus on online sales and new payment technologies, identify and adopt suitable technologies into their business and innovate through the introduction of new products, services or processes
Shopline, the Asia-based e-commerce platform operator that has helped over 350,000 merchants open their online stores, says retailers in Hong Kong should grasp the valuable opportunity of the disbursement of the HK$10,000 ($1,280) electronic consumption vouchers. Brick-and-mortar shops may not be able to benefit from this round’s consumption vouchers as the city is under strict social distancing restrictions.
According to Shopline data, when the Hong Kong government released electronic consumption vouchers for the first-time last year, the gross merchandise value (GMV) for Hong Kong merchants grew by 40 percent to 70 percent year-on-year, and the total order volume also increased by 60 percent to 80 percent.
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Shopline Hong Kong General Manager Nick Gao said the city is lagging behind other Southeast Asian economies in e-commerce penetration, but the city is catching up.
“Hong Kong enjoys a high internet and mobile penetration rate, and the dominance of social media platforms, including WhatsApp, Facebook and Instagram, is definitely one of Hong Kong’s strengths that enables the emergence of social commerce, and this grew even more rapidly during the pandemic,” Gao said.
People visit a promenade next to Victoria Harbour in Hong Kong on March 14, 2022. (DALE DE LA REY / AFP)
Hong Kong’s relatively small market size means that Hong Kong businesses must embrace digitalization to reach overseas customers through e-commerce initiatives
“All SMEs need to embrace digitalization and not be afraid of change. We also need to educate consumers on the ease of e-commerce — it will be a group effort involving corporates, SMEs and consumers to achieve full digital transformation within Hong Kong,” he added.
According to the business information provider GlobalData, Hong Kong’s e-commerce sales are expected to grow at a compound annual growth rate of 8.3 percent from HK$178 billion in 2021 to HK$226 billion in 2024.
But Hong Kong’s relatively small market size means that Hong Kong businesses must embrace digitalization to reach overseas customers through e-commerce initiatives.
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“Companies need to understand how digitalization impacts the business environment which will then lead the digital strategy. Digitalization must be driven by the board and its executives and not by specific functions — one of the barriers that businesses in Hong Kong may face is the late adoption of digitization from senior management,” Gao said.
The e-commerce platform operator in March launched a subsidy program for SMEs totaling up to HK$4 million, including comprehensive assistance in advertising, customer service, logistics, and payments to help merchants build their online presences.