Deloitte raises Hong Kong retail forecast to HKD412 billion for 2026 as first-half sales beat expectations

Hong Kong's retail market delivered a stronger-than-expected first half of 2026, with sales up 9.7% to reach approximately HKD203 billion. Amid the city's strongest half-year economic growth in nearly five years, this surge was driven by good performance in high-value categories, with consumer durable goods rising 26%, while jewellery, watches and clocks, and valuable gifts rose 24%. Building on this upward trajectory, Deloitte China has raised its full-year retail sales forecast to grow by 8.4% to HKD412 billion, projecting a 7% growth for the second half of the year.

Michael Cheng, Deloitte China Hong Kong Consumer Markets Business Leader, says, "Strong visitor arrivals, positive wealth effects, and technology upgrades collectively supported our robust first-half expansion, while a steady rise in online sales points to shifting consumer shopping habits. We are also seeing technology replacement cycles significantly boosting demand for AI-enabled phones, laptops, and smart-home ecosystems. Meanwhile, a steady recovery in property transactions has also lifted appliance and household goods sales. Looking ahead, improving property market is expected to continue to strengthen the purchasing power of local high-net-worth consumers, with a packed calendar of mega events and festivals set to draw international visitors and stimulate consumption."

Hong Kong welcomed approximately 26.7 million visitors in the first half of the year, representing a 13% increase year-on-year, including more than 20 million arrivals from the Chinese Mainland. Recent RMB appreciation has made local goods highly attractive to Chinese Mainland tourists, while fluctuating gold prices sparked heightened demand for luxury products and gold jewellery. Furthermore, an influx of high-spending overnight visitors from the Middle East, the United States, and Europe provided a crucial anchor for luxury retail brands.

On a full-year basis, Deloitte projects jewellery, watches and clocks, and valuable gifts at HKD60 billion (+15.4%); clothing and footwear at HKD50 billion (+16.3%); medicines and cosmetics at HKD40 billion (+11.1%); and consumer durable goods at HKD68 billion (+15.3%). High-value categories benefit most from tourism and wealth effects, while Chinese Mainland cross-border shopping supports medicines and cosmetics, as well as consumer durable goods.

Three priorities for sustainable growth

The strong first-half performance signals that Hong Kong's retail sector is poised to continue expanding in the second half, though market momentum is expected to moderate into a stabilized, sustained upturn. Full-year visitor arrivals are expected to increase 18% to 59 million, including 46 million from the Chinese Mainland.

Online sales, which rose 27.9% in the first half, are expected to normalize in the second half, with full‑year growth projected to surpass 20% and penetration exceeding 10% of total retail sales for the first time. Beyond digital channels, achieving sustainable growth will depend on retailers remaining closely aligned with shifting Chinese Mainland consumer demand and property market trends.

Michael Cheng adds, "To turn this strong first-half growth into lasting momentum, retailers should focus on three strategic priorities: tiered luxury options, stronger customer value, and sharper cross-border pricing. This includes introducing 'micro luxury' items, such as smaller entry-level formats, travel sizes, or bundle sets that cater to budget-conscious shoppers looking for affordable luxury indulgences. At the same time, brands must differentiate themselves by offering sustainable products, personalized experiences, and AI-driven loyalty programs to deepen engagement, especially among Gen Z. As more and more consumers compare prices across borders, equally important is for brands to align their market pricing and tax structures to remain competitive in an increasingly global shopping landscape."

Luxury enters a relationship economy, powered by AI

This local demand for high-value goods mirrors the broader trends shaping the global luxury landscape. According to Deloitte's 2026 Global Powers of Luxury report, China remains central to global luxury demand, while AI is set to fundamentally transform the entire luxury lifecycle.

Ryan Wu, Deloitte China Lead Client Service Partner – Strategic Clients, says, "China is expected to maintain a pivotal role in the global luxury market, with 19.3% of executives citing it as the primary driver of luxury consumption in 2026, highlighting its role as a structural growth engine with even more sophisticated consumers. Japan follows closely at 19%, as a weak yen draws foreign shoppers, while the Middle East stands at 17.9% on the strength of its luxury retail and hospitality ecosystems. Growth is visibly shifting from physical goods to high-end experiences, with luxury travel leading category growth at 36.2%, nearly double the rate of beauty.

As the industry enters a relationship economy defined less by units sold and more by the depth, intimacy, and fluidity of brand-consumer connections, mainstream e-commerce and direct-to-consumer channels will underpin global expansion, reinforced by the growth accelerators of social commerce, lifestyle diversification, and co-branding and cross-industry collaborations. Together, these touchpoints will progressively redefine how value is created and captured across different geographies over the next five years."

The report also captures a mood of cautious confidence among senior executives, who are setting operational and performance discipline as a clear business priority. 2026 is being seen as a year of profitable resilience rather than exuberant growth, with 81.2% of surveyed executives planning strategic price adjustments and 70.7% expecting maintained or improved margins.

Ryan Wu adds, "AI will be the defining force over the next five years, completely rewriting how luxury is designed, sold, and experienced. To unlock its full potential, brands must integrate AI with advanced data analytics to ensure transparency and consumer trust. Alongside this technology shift, we are seeing a strategic pivot in how brands reshape their networks for the current geopolitics and sustainability challenges, evolving from sprawling global networks to localized regional resilience to enhance autonomy, improve responsiveness, and unlock regional markets. Driven by ethical consumer demand and tightening international regulations, transparency is no longer optional, but a core legal and reputational necessity that reflects deeper forces reshaping global trade flows."

Tax and supply chain as strategic drivers of profitability

With the focus shifting toward regional resilience and competitive cross-border pricing, retailers must recognize that tax and supply chain functions are no longer simple back-office operations. Global disruptions, digital trade rules, and real-time reporting have made them strategic drivers of survival and profitability.

Sarah Chin, Deloitte China Tax and Business Advisory Partner, says, "For Hong Kong luxury companies expanding outbound, integrating a forward-thinking global tax strategy directly into supply chains is a critical business imperative. Incorporating tax intelligence at the early stages of supply chain design, such as choosing warehouse locations, structuring IP licensing, and selecting distribution hubs, ensures cross-border movements do not trigger double taxation or prohibitive compliance costs."

A primary challenge for global brands is managing import duties on high-value goods as traditional tax exemptions are gradually disappearing in major international markets. This shift directly disrupts traditional distribution and shipping models by adding formal customs overheads, flat fees, and global minimum tax pressures to international supply chains.

"Advance tax planning is the solution, through network design that moves warehouses closer to low-tax zones, leveraging Free Trade Agreements to lower import fees, and reviewing transfer prices between intercompany charges. Managing tax and supply chain together keeps businesses legal, cuts extra costs, and protects the flow of goods around the world," Sarah Chin concludes.