Deloitte expects Hong Kong retail sales to surge up to 8% in 2026 to around HKD410 billion

Hong Kong's retail sales are forecast to rise by up to 8% this year, with the city poised to gain from China's anticipated economic recovery through Central Government's consumption stimulus, real estate stabilization, and the "anti-involution" drive, according to Deloitte China's Hong Kong Retail Market 2025 Review and 2026 Outlook. While geopolitical risks remain, the outlook is reinforced by wealth effect from a steadier local real estate market, continued optimism in the equity market, and inbound visitor growth fuelled by a stronger RMB. The study underscores that efficient tax planning and AI-enabled cost optimization will be critical for retailers seeking to enhance efficiency, boost margins, and adapt to a rapidly evolving market landscape.

Deloitte China Hong Kong Consumer Markets Business Leader Michael Cheng says, "Amid macro headwinds including slower economic growth, high interest rates, and global trade tensions, Hong Kong's retail industry came under pressure in the first half of 2025. As the impact of tariffs eased and interest rates gradually declined, the market stabilized in the second half, thanks to China's stimulus measures, a continued rebound in the equity market, and higher tourist spending alongside rising visitor arrivals from both Mainland and international markets. This recovery sets the stage for renewed confidence heading into 2026, as retailers adjust strategies to capture both local and visitor demand."

Meanwhile, outbound travel by Hong Kong residents picked up pace last year, diverting part of local consumption to Mainland and overseas markets, though a stronger RMB toward the end of last year signalled lower northbound spending ahead. In the coming year, Deloitte expects inbound tourism to continue boosting spending in visitor-focused sectors such as luxury goods, consumers electronics, medicines and cosmetics, and food and beverage, yet the outflow of local spending from outbound travel may continue to offset part of these gains for retailers.

Michael Cheng adds, "Following a much better recovery in the second half of last year, we expect Hong Kong's retail market to maintain momentum in 2026, with full-year retail sales rising up to 8% to around HKD410 billion. Consumer confidence is set to strengthen, supported by a stronger RMB and rising inbound visitors, alongside much better wealth effect from a steadier real estate market and an enhanced equity market driven by imminent rate cuts and increased IPO activities. Key categories are expected to lead this growth, with jewellery, watches and clocks, and valuable gifts rising 19%, clothing and footwear 16%, medicines and cosmetics 11%, and department stores 10%. Similar to 2025, the second half is likely to outperform the first as broader economic impacts typically lag the equity market by around six months."

Mega Events, IP Assets, and Big Data Fuel New Growth

With the mega events economy gaining traction in 2025, Deloitte recommends the HKSAR Government deepen and expand its strategy by stepping up support for large-scale sports events, concerts, exhibitions, and international conferences to attract more visitors and extend their stay in Hong Kong.  By fully leveraging venues such as the Kai Tak Sports Park and Kai Tak Cruise Terminal, the city can stage more flagship events, elevate its international profile, and reinforce its position as a leading destination for tourism and conventions.

"Licensed IP collaborations, experiential retail, green consumerism, and emotional shopping are emerging as key themes for retailers. Together with personalization and loyalty programs powered by big data, these strategies will be critical in differentiating offerings and deepening consumer engagement," says Micheal Cheng. "At the same time, retailers can expand their customer base and increase stickiness by encouraging mobile payment and offering 'Buy Now, Pay Later' options."

Online retail sales in Hong Kong reached HKD36 billion in 2025, a historical high since 2020, as consumers embraced the convenience and variety of digital platforms. Gen Z is driving demand for personalised, seamless, and fast shopping experiences, supported by innovations such as same-day delivery, smart locker systems, and AI-enabled recommendations.

To help local retailers accelerate digital transformation, Deloitte suggests that the HKSAR Government strongly encourage and support retailers in their wider adoption of AI applications to enhance retail scenarios and cost management, as well as strengthen policies for AI investment through subsidies and tax incentives. "With stronger facilitation from the government, more retailers can leverage available incentives to drive digital transformation, enhance resilience, and remain competitive in an increasingly complex marketplace" adds Michael Cheng.

Tax Efficiency Key to Retail Competitiveness 

Deloitte China Southern Region Business Tax Services Leader Winnie Shek says, "Tax efficiency and operational agility are now even more critical for survival and competitiveness, given the structural shifts, changing consumer behavior, and intensified competition in Hong Kong's retail landscape. As cross-border e-commerce grows, retailers should take advantage of available tax incentives to support investment in digital tools and solutions. By formalizing these innovations through patents registration, they can access Hong Kong's 5% preferential tax rate, provided eligible R&D activities are substantiated and expenditures are incurred."

Hong Kong’s free-port status also offers a competitive edge for online retail platforms, as goods can be stored tariff-free until dispatched to taxable markets while minimal customs intervention enables faster delivery to consumers. Building on these advantages, Deloitte recommends that retailers integrate digital trade solutions such as automated customs declarations and real-time tracking systems to enhance visibility and compliance.

"To manage liquidity under pressure, eligible retailers can consider establishing regional treasury centers in Hong Kong, where the absence of withholding taxes on interest payments and access to a deep financial market make it an ideal hub for intra-group financing," adds Winnie Shek.

Leveraging AI for Cost Transformation

Deloitte China Hong Kong Strategy & Business Design Leader Falcon Chan says, "Hong Kong's retail industry has entered a new operating regime where volatility is structural, not cyclical. With margins under pressure from wide-ranging factors like demand swings, labour shortages, rising rents, cross-border price transparency, and geopolitical frictions, cutting costs alone is no longer enough. To stay ahead, leading retailers are increasingly using AI to turn savings into new growth, elevated customer experiences and released cash to fund innovation."

Specifically, retailers can focus on five priority levers to optimize costs and unlock value: pricing and promotion discipline, smarter inventory and availability, store productivity, omnichannel economics, and a reset of selling, general and administrative (SG&A) expenses. By applying AI and automation to enable smarter decision-making across functional areas, retailers can achieve sharper forecasting, more efficient operations, and stronger controls.

"When deciding on AI investment, retailers should adopt a long-term strategic view and focus on using AI to protect margins and power the next wave of growth. The imperative for Hong Kong retailers in 2026 is clear: turn AI backed value creation into a transformation engine that sharpens local competitiveness today and builds a platform for go global ambitions," adds Falcon Chan.