After years of booming retail sales in Hong Kong, observers are suggesting the current downturn should help balance the sector over the long-term.
With a slowdown in the mainland economy and a change of tourists' consumption habits, overall retail sales as of the end of April in Hong Kong are down 2.2 percent year-on-year, with as much as 20 percent plunge in the purchase of watches and jewelry.
Tom Gaffney, Head of Retail Sales at consultancy JLL, says the slowdown isn't all bad news.
"A lot of watch and jewelry brands, unfortunately, their margins have been squeezed by high rents, as a result, looking not to renew some of the locations or move to cheaper locations. This is creating opportunities for sectors such as cosmetics. In terms of other sectors that we are seeing quite decent growth is electrical, photographical and fast fashion."
Gaffney also says he believes the transforming landscape will make Hong Kong's retail sector more sustainable.
"Watch and jewelry might be giving up stores, it's been taken up by other sectors. What we will see is in Causeway for example is that rental drop, that will make way for new brands to take up the stores. So I think the pain is gonna be temporary, maybe another year and a half. "
Causeway Bay, which was once the world's most expensive street in terms of commercial rents in recent years, is expected to cut its rents by up to 20 percent this year.
With relatively sluggish local consumption, many brands are looking to the e-commerce market.
Cosmetic company Lush is one of them.
Annabelle Baker is the director of the company's Asian business.
"We actually are already on Tmall International, a Hong Kong listed company. We found the sales there have been growing rapidly. Obviously more consumers find that. So actually we could see is that a lot of mainland Chinese consumers are maybe buying more online than they are maybe coming to the shops. "
Data shows the number of mainland visitors to Hong Kong during the Dragon Boat Festival this past weekend has dropped by 2.5 percent, the first time in five years.
It's a reversal of the average growth rate of 20 percent for the past three years.
At the same time, starting from this year, top luxury brands like Chanel and Prada are cutting thousands of HK dollars in their prices to consolidate the market, a rarely seen discount in town.
