E-commerce as a percentage of total retail in Hong Kong is relatively low—just 7 percent.¹ Hong Kong is a compact, urban region with excellent transport infrastructure, which to date has supported physical retail.
 

In addition, compared with other markets included in our report, a significant portion of the population is yet to make their first online purchase. In a population of 7.5 million, four out of 10 citizens do not use e-commerce.²
 

However, e-commerce uptake is increasing. This is being driven by rising smartphone uptake and younger generations shopping via social media channels.³
 

Marketplaces Taobao and Tmall and are the most popular e-commerce sites in Hong Kong.⁴ Key marketing events to know include Singles’ Day on November 11, ‘Summer Fun’ in June–August and Chinese New Year in January/February.⁵

• Hong Kong generated double-digit rises in sales in 2017 and 2018, slowing in 2019.⁶ Looking ahead, growth is predicted to continue at a compound annual growth rate (CAGR) of 7.8 percent to 2023.⁷
  
  
• The average annual online spend is HKD7,248 (US$925). This is lower than mainland China (RMB9,763/US$1,463).⁸ During the COVID-19 pandemic in the first half of 2020, more than half of online shoppers said they had started to buy more groceries and personal hygiene products online.⁹
  
  
• That said, Hong Kong moved quickly to implement track-and-test measures during the COVID-19 pandemic. As a result, infections were low and there were fewer restrictions on citizens.¹⁰ The pandemic may not have as lasting an impact on e-commerce as in other nations included in this report.

• At 91 percent, Hong Kong has very high internet penetration, outranking e-commerce forerunners China, the U.S. and the UK.¹¹ This means international merchants can access the vast majority of Hong Kong’s citizens.
  
  
• Smartphone uptake is also high, at 76 percent.¹² This has led to a confident mobile commerce growth prediction of 13.2 percent compound annual growth rate to 2023, by which point it will be a projected US$3.5 billion market.¹³
  
  
• 5G launched in Hong Kong in 2020 and is expected to be rolled out across the city-state in the second half of 2020.¹⁴ Increased on-the-go internet speeds could further support mobile commerce.

• Hong Kong’s mobile commerce uptake is lower than mainland China, which has the highest rate globally (60 percent). However, with 47 percent of transactions completed via mobile, it is a significant part of overall e-commerce and merchants should offer both mobile and desktop sites.¹⁵
  
  
• The most popular devices to access e-commerce are mobiles (49 percent), desktops (33 percent) and tablets (19 percent).¹⁶
  
  
• Apps are preferred over browsers to complete transactions. Historically, domestic merchants in Hong Kong have been slower than their mainland China counterparts to offer e-commerce apps—international merchants could capitalize by developing easy-to-use apps in response.¹⁷

• Cards are the most utilized payment method for Hong Kong e-commerce, used in 40 percent of all transactions.¹⁸ Credit cards are in high use, with 2.62 credit cards per capita, compared to just 0.82 debit cards.¹⁹
  
  
• The ubiquity of Octopus, a local card-based payment method originally devised for transit payments but now enabled for online payments, will support ongoing card use. The card has almost total penetration: 95 percent of the population aged between 16 and 65 use the card.²⁰
  
  
• Digital wallets are the second-most popular payment method, taking 36 percent of online transactions.²¹ This method is rising in use. China’s Alipay and UnionPay are key brands and allow card integration.

Cross-Border Spending Outranks Domestic E-commerce Spend 

• Cross-border spending is high and a key element of Hong Kong e-commerce, taking 70 percent of the overall e-commerce market. Owing to Hong Kong’s small domestic e-commerce market, 75 percent of online shoppers have already shopped cross-border.²²
  
  
• China, Singapore and Japan are the most popular cross-border destinations, offering relative proximity and a huge range of goods.²³
  
  
• Hong Kong can support increasing amounts of cross-border trade. It ranks 12^th in the World Bank’s global ranking of logistics capabilities and quality, one of the highest rankings of the international countries included in our report.²⁴

Regulation/trends
The Hong Kong Monetary Authority has closely followed Europe’s revised Payment Services Directive as a template to update its online banking regulations. The authority launched its open application programming interface framework in January 2019, which is being launched in phases.²⁵

Barriers or benefits to e-commerce market entry
Delivery costs can be higher than in other markets. With many consumers being busy or working outside the home, first time home delivery often fails, increasing costs.²⁶

No local entity is required. There are no currency or foreign exchange controls.²⁷

Factors driving the cost of payment acceptance
Acceptance fees vary. PayPal™ and UnionPay, for example, have higher fees than Alipay (0.55 percent of transaction value).²⁸

J.P. Morgan has analyzed 34 e-commerce markets to decipher the trends and challenges driving global e-commerce in 2020. To access our insights on a country-by-country basis, click here.