Brands are adapting to a new definition of luxury, and Asia’s malls must follow suit
Stroll around Hong Kong’s bustling Tsim Sha Tsui shopping precinct and, no doubt, you’ll see swathes of designer devotees.
The Louis Vuitton bag is ubiquitous, adorning every other well-styled arm on the high street; a symbol of Asian consumers’ insatiable thirst for luxury.
Following a strong rebound from the GFC, the luxury sector is booming, especially in China, which could account for over 20 per cent of the world’s total luxury spend by 2015*.
But, increasingly, there’s a move away from mass-market luxury, as high net worth spenders scour the shops in search of something different. Top tier brands, and the malls in which they’re housed, are employing ever more outlandish tactics to clamour for consumer dollars.
"It’s not that people are getting tired of luxury, it’s just that after such a successful run, and with consumers becoming more savvy, people are looking for something new," says Tom Gaffney, Head of Retail, Hong Kong, for JLL.
The boom in bespoke
Bespoke is the new buzzword among today’s Asian upper and middle classes.
Names such as Rick Owens and Kiton are emerging, along with understated luxury brands such as Bottega Veneta: “You might know it’s a Bottega Veneta bag because of the symbol but it’s not plastered all over it like some brands,” Tom says.
Satiating this deep-pocketed society’s desire for new models of luxury presents a challenge to retailers and, for landlords, this means being creative with store space.
In-store VIP rooms are now highly sought after – Swiss watchmaker Breitling says VIP treatment is vital in attracting its high net worth customers – and secluded VIP-only entrances entice customers to roll up in their Rolls-Royces. Flagship stores resemble spacious galleries, often exceeding 5,000 sq ft and, as consumers demand more, landlords and brands are attempting to out do each other to perfect the ideal of bespoke.
Tom refers to one client (who can’t be named) that engaged JLL to seek out a secluded warehouse to create an invite-only fashion showroom, accessible via a secret password-protected door: “We’ll see more brands retaining exclusive collections for their ‘V, V, V IP’ customers.”
From city centre to CBD
Today’s retailers must be savvy in the face of change – offering a pop-up shop won’t necessarily cut it. Sales of luxury bags can’t maintain a decent margin in the face of ‘exorbitantly high’ rents, as Tom puts it, which are pricing many out of central areas in cities such as Hong Kong and Singapore. For landlords, this means luring retailers out of town with the promise of more competitive rents in ‘mixed-use’ developments.
While mixed use is nothing new, retailers are still very nervous about it, favouring the familiarity of traditional malls, which offer plenty of space and a guaranteed consumer footfall. But shopping centres must ‘reposition themselves and their tenant mix’, says Tom.
Singapore’s CBD is showing signs of developers responding to this trend for ‘decentralisation. For example, when the Tanjong Pagar Centre, on the southern side of Singapore’s CBD, opens in 2016 it will not only become Singapore’s tallest building, at 290 metres, it will house six levels of retail and F&B space, along with offices and apartments. There are projects like this in the pipeline in cities across Asia, from Jakarta to Beijing.
"Its fusion of premier office, retail, residential and hospitality spaces raises the bar for what is available in this part of the CBD," says Trina Loh, Group Managing Director, GuocoLand (Singapore) Pte Ltd, the developer behind the Tanjong Pagar Centre.
"As such, it will become one of the CBD’s, and the region’s, most sought-after addresses not only for work, but for live and play as well."
Ever evolving and fiercely competitive, that’s the outlook for Asia’s retail market, and it seems clear that the most agile brands and forward-thinking developers will become the success stories of tomorrow.