Northbound spending: Hong Kong beauty sales at risk as shoppers flock to Shenzhen warehouse stores
![Sa Sa says spending in Hong Kong is being impacted as locals flock to Shenzhen in search of bulk deals. [Getty Images]](/var/wrbm_gb_food_pharma/storage/images/_aliases/wrbm_large/publications/cosmetics/cosmeticsdesign-asia.com/headlines/business-financial/hong-kong-beauty-sales-at-risk-as-shoppers-flock-to-shenzhen-warehouse-stores/17533117-1-eng-GB/Hong-Kong-beauty-sales-at-risk-as-shoppers-flock-to-Shenzhen-warehouse-stores.jpg)
American membership-based warehouse chains Costco and Sam’s Club are growing in popularity in among the bargain-hunters in China where the economic recovery continues to be sluggish.
Hong Kong residents are now making increasing trips to their locations in Shenzhen, which is a mere 15 to 20 minutes away by high-speed rail.
“Previously nearly all planned travel but now unplanned travel is becoming as common, as local residents living in the northern districts find it quicker to travel for a dinner in Shenzhen on a weekday after work than to go to a local hub such as Mongkok or Causeway Bay,” observed Sa Sa in its latest annual report.
It said the trend of travelling across the boundary to Shenzhen during weekends and public holidays started in 2023 but has accelerated with the popularity of these warehouse chains, which have become “must-go” destinations.
The accessibility to these chains has increased significantly as well, with Sam’s Club Shenzhen launching an online shopping and delivery service for Hongkongers in June.
“For those who don’t want to make the trip, daigou direct delivery to your home in Hong Kong is also a popular choice and essentially no different from ordering online from local Hong Kong retailers,” said Sa Sa.
While the firm believes this new consumer behaviour is not impacting Hong Kong’s beauty market directly so far, it noted that impact is felt as locals are not spending time or money in the city.
“While northbound spending appears to be concentrated on food and beverage, groceries and leisure, and not beauty products, the impact on the group’s business is that local shoppers with disposable incomes are physically not present during weekends and public holidays, and more of their disposable income is allocated elsewhere.”
China’s value hunters
Across the bay, Sa Sa has observed that brand names matter less to China’s beauty consumers as they exercise caution with their spending amid the economy’s slow recovery.
This is a welcomed development for the retailer, which offers a wide range of beauty brands in the premium, or masstige, segment.
“Mainland China's economy has been recovering at a slower pace than expected. The consumers have become more cautious about their spending. They are opting for value-for-money products and are not so fixated on established big-name brands,” said Dr Simon Kwok, chairman and chief executive officer of the group.
With less emphasis on established brands, Sa Sa sees this as an opportune moment for emerging niche brands to capture Chinese consumers as there is “greater willingness to try niche brands”.
This is pushing Sa Sa's strategy of developing a portfolio of exclusive niche brands.
“This shift in consumer behaviour aligns well with Sa Sa’s brand strategy of developing a portfolio of exclusive niche brands,” said Kwok.
He added that the firm would leverage its cross-border e-commerce platforms to give consumers access to a more diverse selection of products.
The company said it was actively seeking partnerships with emerging and niche brands to enhance its portfolio of exclusive brands.
According to Sa Sa’s corporate website, it carries beauty brands such as Muzigae Mansion, Suisse Programme, and VT Cosmetics.