Korea is a very important export market for New Zealand. Large discount stores, outlet stores and convenience stores are rapidly expanding throughout South Korea, particularly in the suburbs. In fact, outlets and warehouse-type chain stores have been growing faster than department stores and regular discount stores in recent years. The large growth in single-person households has led to increased demand for single-serving products and increased traffic to smaller drug stores that tend to cater to this demographic. Online marketing and sales is also a rapidly growing method of reaching consumers, Korea is the most connected country in the world and Koreans are generally comfortable in buying goods and services online.
The Hong Kong retail market is worth USD $31.8 billion. There are two distinct categories of consumers in Hong Kong: local consumers and tourists. There are 6.5 million residents in Hong Kong, who enjoy a high degree of spending potential. However, tourists tend to buy expensice luxury goods thus generating more than USD 10 billion in income per annum. Note that tourists who visit Hong Kong for shopping are mainly Mainland Chinese.
The distribution network consists of several small and medium family type enterprises who tend to be grouped together. The large stores like Lane Crawford, Seibu or Sogo appeal to the luxury-item market, whereas the supermarkets and neighbourhood stores, such as Wing on, Sincere and Jusco are more suitable for bulk purchases. The latter market is dominated by the duopoly Park'n Shop and Wellcome. Discount stores are also present in Hong Kong and are targeted towards products with short shelf lives.
Franchises like 7/11 and Circle K, and small neighbourhood stores are popular for their convenience and provision of small volume purchases. These stores are open all the time. Note that Manning's and Watson are more sophisticated and marketed towards hygiene, beauty, home care and baby products.
For more information: Hong Kong Retail Management Association (HKRMA)
The total turnover of direct selling in Hong Kong was USD 513 million in 2013 (-3.7% compared to 2012 but +18.6% over the last 3 years). The sector employs around 615,000 people. Consumers of Hong Kong prefer to buy in the store rather than by internet or by distance selling (tele-sales). However, since the 1998 crisis, direct selling has not stopped growing, particularly that pertaining to dietary supplements. Direct selling is now the fastest growing segment of the marketing business and also the segment that produces the most substantial profits for every business. It has changed significantly over the last decade and is now multichannel and electronic to a large extent. The direct selling business environment relies on a highly developed supply chain infrastructure that enables even small firms to sell directly to their consumers with minimal complications. Hong Kong has maintained its position as one of the world’s leading digital cities. In Hong Kong, 90% of the population has access to Internet. The B2B e-commerce is highly developed. However, consumers may remain hesitant for online purchases due to security reasons and a lack of confidence on the websites. Helpful links:
USING AN AGENT
This is one of the best forms of Hong Kong market penetration. They are much less specialized than in Europe or United States, but they concentrate on one line of business.
Where to Be Vigilant
In Hong Kong, there is no legislation on agency contracts. Therefore care must be taken while signing the agency contract.
Elements of Motivation
The remuneration amount for an agent is an important motivating element.
The Average Amount of Commission
5 to 18%, based on the sectors.
It is easy to establish a franchise system for a foreign company since there is no specific legislation, exchange control, anti-monopoly law and no equity obligation for foreign and local shareholdings in partnerships. There are nearly 90 franchise brands present in Hong Kong. Most franchise growth in the past two years has been in real estate brokerage, quick service food and beverage operations, and learning centers. Quick service food and beverage concepts and concepts related to children, education and fitness are especially promising. Hong Kong, with its open import market, excellent transportation and business infrastructure, serves as a regional distribution, logistics and marketing hub for many franchisors to service existing Asia Pacific franchisees. Successful franchisors are those who understand the need to tailor products and services to local consumer tastes and the need to have a regional presence in Hong Kong to develop local business relationships, be in regular touch with the local franchisee to build the business, and fine tune the product offerings and services.
SETTING UP A COMMERCIAL UNIT
Although this establishment is expensive, setting it up in Hong Kong means opening a door to Asia, particularly for China with the signature of CEPA (Closer Economic Partnership Arrangement, free trade agreement between HK and China). There is no restriction about foreign ownership in Hong Kong.
Like the branch, this is a means for a company to establish itself. However, a representative office can only exercise limited functions. This is a form of establishment which enables you to analyze the Hong Kong market before investing more. For further information visit the Invest in HK website.
A branch can enhance its reputation of creditworthiness. Different from a representative office, a branch has greater liberty to operate and a more favorable tax treatment.
A subsidiary can be freely established in Hong Kong. It offers a better guarantee for trademark protection, obtaining credit and penetrating markets.
Market Access Procedures
When a cargo arrives at the port, even before the importer has taken possession, the products are inspected and occasionally sampled by the customs authorities. Once approved, the importer collects a “release” letter. It is to be noted that the importer should file an "import declaration" with the "Customs and Excise Department", within 14 days from the import.
Specific Import Procedures
Local importers should buy a license in case they import products subjected to import duties. A license should be bought for each import.
An inscription on the product should specify if it is a free sample and that it cannot be sold. The samples can be distributed freely.
CUSTOMS DUTIES AND TAXES ON IMPORTS
Customs threshold (from which tariffs are required)
Hong Kong is a duty free destination. No duties or taxes are collected.
Average Customs Duty (Excluding Agricultural Products)
In line with the status of a Free Port, Hong-Kong does not impose customs duty on entry of general goods in its territory. Only some goods are subjected to payment of the following duties:
- Tobacco: tax calculated on the volume.
- Spirits (alcohol 30%): 100% of the CIF value.
- Wines: from 60% of the CIF value to 0% in 2008.
- Beer: 30% of the CIF value
- Petroleum products: tax calculated on both volume and value
Hong-Kong applies the Harmonised Custom Systems. The imports are managed by Customs and Excise Department. Due to its status of Free harbor, Hong Kong does not impose customs duties on the entry of the general goods on its territory.
Hong Kong collects a charge of HKD 0.20 on the import declarations of goods (for non-food item imports above a CIF value of HKD 46,000: add HKD 0.125 for every extra HKD 1,000.) Consult the Hong Kong Customs and Excise Department for more information.
LABELING AND PACKAGING
Labels should be in either English or Chinese and use the metric system to measure units. The mark of origin is needed.
Labelling should be uniform and clear. The product name (English + Chinese), ingredients or composition also in both the languages, should be mentioned.
Obligatory information for drinks, for example : name of the product, name and address of manufacturer, list of ingredients (in decreasing order of weight and volume), added products, indication if alcohol is there, its weight and volume in metric units, shelf life of the product (for more than 1.2% alcohol). Visit FAS, HK5021 report, for further information on the usage of spirits.
GMO (Genetically Modified Organic) labelling: Till date, no legal obligation to indicate anything on biological order and GMO products.
Hong Kong’s nutritional labeling regulation took effect July 1, 2010. The regulation requires all prepackaged food sold in Hong Kong to label the product’s energy content plus seven nutrients: protein, carbohydrates, fat, saturated fat, trans fat, sodium and sugars. Packaged products which make claims such as “low fat” or “high in Vitamin A” must meet additional labeling and definitional requirements as uniquely spelled out in the legislation.
In May 2008 the Energy Efficiency Labeling Ordinance has been enacted for electrical appliances. It is intended to assist consumers in choosing energy efficient products. Click here for more details.