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Hong Kong's protest-hit stores need a dose of Chinese medicine

Hong Kong

HONG Kong's protest-battered stores could use an overseas remedy.

Hong Kong-listed cosmetics retailer Sa Sa International has lost more than 40 per cent of its market value this year, making the brash cosmetics chain a prominent retail casualty.

With the local economy cooling fast, there has never been a better time to venture elsewhere.

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After six months of anti-government demonstrations, the economic toll is rising, not least on the city's usually packed shopping streets.

By October, the month's retail sales were down a record 24 per cent year-on-year, with cosmetics and medicines in particular down by a third.

Sa Sa, a US$680 million purveyor of cheap lipstick, had already warned in September that falling sales would result in losses for the previous five months.

It's not just make-up: US$480 million clothing retailer Giordano blames the clashes for weaker revenue and has seen its value shrink by a third.

Landlords are under pressure to offer rent relief, but concessions have so far been meagre.

A survey conducted by the Hong Kong Retail Management Association and released on Dec 9 found that some 7,000 licensed retail establishments, out of 64,000 in the territory, said they would close in the next six months.

The reality is that months of unrest exposed an existing weakness: many local retailers depend on visitors from across the border, often buying in bulk.

That's fine - until tour buses stop coming. From July to September, Sa Sa said the number of transactions by mainlanders at Hong Kong outlets were half what they were a year earlier.

Having suffered through the 2003 Sars outbreak and the 2014 Occupy protests, yet another crisis suggests it's time to change tack.

Sa Sa International on Dec 2 announced that it would close its retail stores in Singapore, where it has had losses for six consecutive years. It will concentrate its resources on Hong Kong, Macau, mainland China and Malaysia, as well as on its e-commerce business.

It can do more, considering that even after expansion abroad, as of March, 85 per cent of its sales came from Hong Kong.

Selling more online can help. But pile-'em-high outfits like Sa Sa, where mainland shoppers account for 70 per cent of overall sales, may just have to follow their fans.

That means home to the mainland, and to the other Chinese destinations of choice, like Malaysia and Thailand.

In a different price bracket, luxury giants like US$222 billion LVMH have countered the territory's slump by selling more to Chinese buyers across the border.

Hong Kong jeweller Chow Tai Fook, meanwhile, has outperformed locally listed rivals in part because of its expansion abroad.

Time for those further down the price scale to follow suit. REUTERS