Before demand was hit by President Xi Jinping’s corruption crackdown and the economic slowdown, Chinese tourists were happy to spend up to HK$100,000 (S$17,555) on a single purchase at Hong Kong jewellery stores like Kingdom Jewellery. Now, many customers are reluctant to spend more than HK$1,000 at a time, according to its manager, Jacky Sze.
The jewellery shop next door has closed down after decades of thriving business, as have many other luxury goods stores across Hong Kong, which is losing its status as the great mall of China.
Retail sales in Hong Kong fell by 10 per cent in the first seven months of the year, compared with the same period in 2015, with purchases of jewellery and watches declining by 22 per cent.
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And recently, the Chinese territory was overtaken by the US as the world’s biggest market for Swiss watches after eight years in the top spot.
Part of the problem for Hong Kong, which relies on the retail sector as an economic driver, is its increasingly testy relationship with mainland China. That has deterred many Chinese visitors, with numbers falling by 9 per cent year on year to 24 million in the year to July.
Hong Kong needs a “permanent restructuring” because it cannot wait for demand from high-spending Chinese tourists to come back, according to Mr Ramesh Tainwala, CEO of Samsonite, the luggage maker. His own company has been changing tack, promoting less-expensive products in the Chinese market as it tries to emphasise the practical advantages of its suitcases rather than their luxury appeal.
Other companies are also being forced to trade down, selling simpler, cheaper products to customers who are growing more interested in specifications and value rather than mere status symbols.
(Source: Today Online)