ANALYSIS OF HONG KONG PRIME RETAIL PROPERTY MARKET
In analyzing Hong Kong’s retail property market, in particular the prime shopping mall segment, Michael Porter’s Five Forces Analysis Model is used. According to Porter, corporations in any industry are constrained from maximizing profit not just by rivalry with their competitors but by four further competitive forces. These five forces shape competitive intensity. They are:
• Rivalry among competitors in the industry;
• Threat of new entrants;
• Bargaining power of suppliers;
• Bargaining power of buyers; and
• Threat of substitute products.
Below is the analysis:
• Rivalry among Established Competitors: Medium Pressure
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• Threat of New Entrants: Low Pressure
o Development levels are at a low resulting in a shortage of prime retail space.
o Entry barriers are relatively high due to Hong Kong’s high land price policy.
o Capital commitments are hefty for shopping malls from architectural design, construction, project operation, through to continuous people development.
• Bargaining Power of Suppliers: Medium Pressure
o Most of the retailers are still in an expansion mode but they are becoming more cautious with respect to occupation costs and selective in terms of locations for expansion or relocation.
o High-end retailers are still willing to pay record rents for the most coveted shops.
o Smart retailers are looking at the long-term, big picture retail experience for the customer: from the ambience of a physical shop, to the look and feel of a website and all the hardware and software that lies between – all touch points are now crucial parts of the whole customer experience.
o Retailers are seeking new channels of growth, for instance engaging in Internet retailing or exploring new retail concepts that could create new consumer interest. They are at the same time becoming pickier in terms of picking the right shopping mall partners that can harass digital technology.
• Bargaining Power of Buyers: Low to Medium Pressure