Financial Secretary Paul Chan on Thursday said retail sales will improve, although challenges remain.

Speaking at a ceremony for the Hong Kong Shopping Festival, Chan cited changes in consumption patterns of tourists and local residents.

"As the consumption patterns of the public and visitors have changed this year, the retail industry faces many challenges," he explained.

"The good news is that the job market is still doing quite well, and there's still spending demand. As long as we change our approach, adjust our positioning, update strategies, link up with new demand and create consumption trigger points, business will certainly come back."

The chairwoman of the Retail Management Association, Annie Yau Tse, said the retail sector is hosting the shopping festival between July 1 and August 31 to boost sales.

"I think this programme is going to help, at least bringing up the atmosphere to encourage our consumers to go to our retail shops to make purchases," she told reporters.

Yau Tse added that more than 5,000 retailers will take part in the festival, offering freebies and concessions worth HK$1.2 billion.