×
Translated by
Nicola Mira
Published
Dec 22, 2016
Reading time
3 minutes
Share
Download
Download the article
Print
Click here to print
Text size
aA+ aA-

As Hong Kong's luxury market struggles, some labels target new openings

Translated by
Nicola Mira
Published
Dec 22, 2016

In the last few weeks, a spate of luxury labels' stores have closed down in Hong Kong. Prada, Ralph Lauren, Forever 21, Abercrombie & Fitch, Coach and Tag Heuer are the latest, confirming that the economy of the Asian metropolis, a key marketplace for luxury goods and fashion, has indeed slowed down in the last two years.


Hong Kong will remain a major city for luxury retail - Wikimedia - commons.wikimedia.org

"Sales of luxury goods [in Hong Kong] have fallen on average by 20% in 2015 and 2016. This does not necessarily mean it is the end of Hong Kong, but the Chinese city will no longer play the role of major Asian market hub as it did before," said Claudia D’Arpizio, a partner at consultancy firm Bain & Company.

Hong Kong's position was indeed strategic. For the luxury goods industry, it has always been the foremost gateway to the Asian market, both in terms of sales and brand image, and brands have invested freely in the city, some of them going as far as opening 10 or even 12 stores there. It was a destination not just for the affluent Chinese clientele, but also for customers from Japan and Korea.

However, the luxury retail trade has been affected by pro-democracy demonstrations and the anti-corruption measures adopted by the Chinese government. Above all, Hong Kong used to be the region's prime spot for affordable prices, and this is now no longer the case. The reduction in the price differential between Hong Kong and mainland China on the one hand, and Europe on the other, has been damaging for the city in the long term.

In addition, luxury stores have widely upgraded in mainland China where, according to D’Arpizio, local consumers "can now find an extensive range of products and enjoy a positive shopping experience."

"The watch segment has suffered the most. A few years ago, watches were sold at prices up to 60% cheaper in Hong Kong compared to mainland China. Nowadays, the price differential is mostly between 5% and 10%, maximum 15%. And the fines imposed by Chinese customs have toughened up. They can reach up to three times the price of a luxury watch, if a Chinese customer is caught," said D’Arpizio.


Moncler is bucking the trend and has recently opened a store in Hong Kong -Moncler - Moncler

Rental prices have not diminished accordingly, even though several Western brands have tried to renegotiate them. All of a sudden, profitability per square metre has plummeted, and luxury labels have closed down many of their Hong Kong stores.

But this does not spell doom for the city. "It remains a key city in the international retail trade landscape, like London in Europe. But the labels' approach will have to change, focusing more on local customers and on very high-end tourism," concluded D'Arpizio. Some Hong Kong shopping malls have learned the lesson, and are now dedicating their initiatives to local customers.

"Although its market has shrunk, Hong Kong remains a must location for luxury goods, and will continue to do so in the future. This is why some new brands are setting up shop there," said Luca Solca, an analyst specialised in luxury goods at Exane BNP Paribas.

For example, the Fast Retailing group's casual wear label GU is planning to open two stores in Hong Kong in spring 2017, its first foray into this market. AMI, designer Alexandre Mattiussi's label, is also set to open a store there by the end of the year, while last October Philipp Plein opened its first Asian junior store in the city.

Indeed, Moncler is betting on Hong Kong and has strengthened its presence there. The down jacket label has notably opened a store in the Pacific Place shopping mall, in addition to the five it already operates in shopping malls and at Hong Kong's airport.

Copyright © 2021 FashionNetwork.com All rights reserved.