Hong Kong small retailers step up investment to take on big chains

They are getting a boost from state funding and fee cuts.

Small and medium enterprises (SME) in Hong Kong’s retail sector are stepping up investments in digital platforms as they seek to compete with bigger chains, supported by state funding and cost-relief measures, analysts said.

Matched funding programmes covering e-commerce, point-of-sale (POS) systems, and customer relationship management (CRM) tools are helping smaller retailers modernise operations and reach both local and overseas customers.

“The one-is-to-one matching subsidies allow small shops to install self-service kiosks or smart inventory systems that were previously deemed expensive,” Pascal Siu, senior research manager and head of green and sustainability at the Hong Kong Foundation, told Retail Asia via Zoom. He added that adopting e-payments such as Alipay and WeChat Pay is key to serving mainland tourists.

Results are beginning to show, according to Marco Poon, editorial panel member at the Chinese University of Hong Kong’s Centre for Family Business.

“The programme targets retail, food and beverage, tourism, and personal services — with strong uptake already helping smaller family businesses lift sales by around 10% in many cases,” Poon, who is also a founding partner at JCP Partners, said in a separate Zoom call. “Several thousand SMEs are positioned to benefit in 2025 and 2026.”

Beyond digital adoption, the government is expanding support to strengthen resilience and encourage overseas growth.

Measures include a $1.43b injection into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), the launch of the Economic & Trade Express platform, streamlined restaurant licensing, and a unified branding initiative for local agricultural and fishery products.

Operating cost relief is also part of the package. Halved water, sewage, and trade effluent charges could save a typical retail outlet $12,000 to $48,000 annually, whilst larger restaurants may save as much as $120,000, Poon said.

License waivers for food, hawker, and liquor businesses are also expected to cut administrative costs by $2,000 to $10,000 per outlet.

“The government anticipates this will encourage 3,000 to 6,000 new outlets or expansions,” Poon said, adding that the measures lower barriers for entrepreneurs and family businesses seeking to grow.

Siu said the waivers could also help struggling venues, especially food and beverage outlets with high licensing costs, to renew rather than shut down.

Both analysts said the BUD Fund and Economic & Trade Express platform let retailers build online shops, register trademarks, and connect with overseas distributors.

Simplified applications capped at $100,000 per project also reduce time-to-revenue, enabling SMEs to move faster on digital initiatives.

Most growth is expected to take place through digital channels, shifting SMEs from rent-heavy models to hybrid setups, Siu said.

Improved CRM data lets retailers retarget customers rather than depend solely on foot traffic, whilst improved payment systems and lower trade barriers support expansion across the Greater Bay Area.

Hong Kong’s economy is forecast to grow about 2% to 3% annually, whilst online retail is expected to post compound annual growth of 7% to 11%, Poon said.

Digitally enabled family businesses are likely to gain market share, though competition from mainland e-commerce platforms remains a challenge over the next three to five years.