Market Insights: E-Commerce in Hong Kong
Hong Kong is a global center for trade, finance, business, and communication. With the strategic location of Hong Kong and their role as regional logistics and international maritime center puts Hong Kong at a different position than most countries in Asia. Hong Kong offers a favorable environment for the development of technology, the internet, and e-commerce. The Information and Communication Technology (ICT) and the internet have played a vital role in the growth of E-commerce in Hong Kong. According to the Census and Statistics Department, the Information and Communication Technology (ICT) sector has contributed HK $139 billion to Hong Kong’s economy in 2013, representing 6.6% of the gross domestic product (GDP). The internet is widely used in the business sector as 79.9% of all establishments in Hong Kong use the Internet. According to Daxue Consulting, the Internet is expected to contribute HK $146 billion to Hong Kong’s economy which is 7% of the island’s GDP in 2015. The sales value of E-Commerce in Hong Kong has reached an astounding HK $400.6 billion in 2014. The estimated E-Commerce in Hong Kong market size is HK $3.5 billion with an average annual spending per user of HK $535. Additionally, we have done a survey and found that 58% of respondents read online reviews prior to purchasing a product and 49% spend a considerable amount of time researching products online prior to buying.
Industry Development and Market Outlook in the E-Commerce in Hong Kong
The adaptation to changes in the constant evolution of shopping behavior and sales strategy is very important. E-commerce in Hong Kong allows geophysical barriers to disappear, the flow of information between retailers and consumers to gain deeper insights into customer’s behavior and industry trends enable a more accurate and precise decision-making capabilities. In addition, Hong Kong’s internet connection speeds are among the highest in the world; with penetration rates of broadband and mobile penetration, 84% and 228% respectively. The internet is widely used by Hong Kong shoppers, particularly the younger generation; luxury products, clothing, accessories, travel and home appliances are a few of the most common online shopping categories. Subsequently, the most popular products bought through via mobile are cinema tickets, clothing, and other fashion accessories.
Below is a table of the category and percentage of the most popular online shopping categories in Hong Kong:
Airline tickets: 75%
Hotel Reservations : 71%
Car Insurance: 21%
Cinema Tickets: 26%
Home appliances: 4%
The penetration of public Wi-Fi in Hong Kong is another development that would grow the e-commerce industry. As of December 2015, it is recorded that there are over 40,000 wireless hotspots installed by the government and private sectors in Hong Kong. As of January 2016, the public will have the ability to enjoy free Wi-Fi service through 17,000 hotspots available in Hong Kong. The number of 3G and 4G customers for the mobile network has tripled in the past 5 years exceeding 13.3 million in 2015.
As the development of E-commerce continuous and the becomes more popular, consumers have to take into account the transportation of the goods, the payment method, and the processes. The transportation of goods via freight rail networks and containerships is often efficient and cost-effective. Consumers should take into consideration the cost and challenge on the last leg of delivery from the port or warehouse to the consumer’s home or business. It can comprise up to one-third of the total shipping cost. Since consumers are often away from home, unattended delivery has become a significant issue among carriers.
Consumers in developed countries usually use credit or debit cards to pay for their online purchases. However, some emerging countries pay via cash upon delivery as their electronic banking system is underdeveloped. Many transactions online are processed through a third-party payment platform which allows payments and money transfers through the internet as an alternative payment method than the traditional paper method. Third-party platforms typically offer a different type of payment methods by consumers such as credit cards, debit cards or bank transfers. In a global aspect, PayPal is the most popular online payment platforms. In China, Alipay is the most widely used platform owned by Alibaba Group. Alipay operates with more than 65 financial institutions, including Visa and Mastercard to provide payment services for Taobao, Tmall, and more than 460,000 businesses in China. Internationally, more than 300 worldwide merchants use Alipay to sell directly to consumers in China. Alipay currently supports the settlement of 12 major foreign currencies.
E-commerce provides consumers a convenient way for purchasing a product as it has revolutionized traditional retail logistics. With e-commerce, a vast number of small parcels can be shipped from the warehouse via vans and trucks directly to individual online buyers.
E-commerce in Hong Kong is changing and being accepted in most economic practices and making competition more competitive. Traditional businesses, willingly or unwillingly have started moving towards “multi-channel” or “omnichannel” models. With the continuation of the popularity of E-commerce sites, businesses should adapt to the changes and improve for the better.
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