The Alibaba effect

Just launched in Hong Kong

In 2013, the Hong Kong government sparked a public outcry over its refusal to give a television broadcast licence to Hong Kong Television (HKTV). Formerly known as City Telecom, the company was founded by Ricky Wong, who in the 1990s made his name by breaking up the long-distance call monopoly held by Hongkong Telecom in the then British colony.

After failing to get the broadcasting licence, Wong turned HKTV into an Amazon-like marketplace. Boasting more than 1.4 million active users, the popularity of HKTVmall has been growing so quickly that some analysts see it as a threat to conventional shopping malls in the city. HKTVmall’s revenues more than doubled in the first half of 2020 from a year ago to HK$1.34 billion ($170 million).

However, just as it seemed to be hitting critical mass, HKTVmall has found itself in direct competition with a far bigger retail behemoth.

Alibaba announced this month the launch of Tmall in Hong Kong. Unlike the Chinese e-commerce firm’s other platform Taobao, which is largely made up of smaller businesses, Tmall caters to larger merchants and big brands. In the past, shoppers outside of mainland China found it difficult to take advantage of the bargain prices on Tmall.

For a start, shipping was prohibitively expensive. Returns, too, were a hassle, not only because of the cost of sending items back but also the customs challenges of sending them across the border into mainland China.

Another factor: Alibaba’s digital payments gateway Alipay is used far less in Hong Kong.

Tmall Hong Kong is still in soft launch mode. The platform is said to have signed up nearly 2,000 retailers and it is offering free delivery and other discounts to lure shoppers. At the moment, the biggest categories on the trial platform are beauty and make-up, apparel, home appliances and electronics, although Tmall Hong Kong is planning to incorporate more brands in the future.

Chan Chi-kin, Tmall’s head of Hong Kong and Macau operations, told reporters that its decision to expand its business into the city of 7.5 million people was driven by residents’ high average incomes.

The launch of Tmall Hong Kong puts it in direct competition with HKTVmall. Investors have noticed: the share price of HKTV plummeted for five consecutive days. This week, it was hovering at around HK$9.2, down from HK$11.1 in late April – meaning it has lost HK$1.5 billion in market value.

A HKTV spokesperson maintains that it is unfazed by the competition, adding that the company believes there’s still room for growth in Hong Kong’s e-commerce market and that it is competitive enough to retain customer loyalty.

Television Broadcasts (TVB), Hong Kong’s dominant free-to-air TV operator, is also planning to expand into the e-commerce market, Singtao Daily reported. Backed by mainland China’s state-owned media investment firm CMC, TVB will set its sight on businesses that connect Hong Kong shoppers and retailers with counterparts in the Greater Bay Area.

TVB and Alibaba are not the only newcomers that are targeting Hong Kong’s affluent shoppers. Recently fresh food retailer Qiandama has also begun selling in the city. The Guangzhou-based company completed a Series D round of fundraising in late December with a valuation of Rmb10 billion. Amongst its investors are Alibaba’s e-commerce rival JD.com.

The bricks-and-mortar chain is well-known for its slogan that it “never sells overnight meat”, offering discounts each day after 7pm to clear stock. After 11.30pm shoppers can hoover up whatever meat is left instore, though Qiandama endeavours to keep low inventory at its outlets to avoid steep markdowns.

The stores are air-conditioned and clean, unlike conditions in some of China’s wet markets. That strategy appears to have struck a chord with Hong Kong consumers as well. The fast-expanding chain, which uses a franchising system, operates over 30 stores around the city.

Qiandama has over 3,000 stores across China, with the majority of the outlets in Guangdong province. It is said to be considering a share sale in Hong Kong that could raise up to $500 million, reports Bloomberg.

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