Wander around Hong Kong’s Harbour City on any given weekend, and among the crowds thronging the shopping mall, talk of a downturn might appear overdone. But it is quieter than in 2014, when queues of mainland Chinese formed just to get into luxury boutiques, driving sales that made the mall responsible for almost a tenth of the city’s entire retail spend.
Recent retail news in Hong Kong has been disappointing. Year-on-year sales were down 21 per cent in February, according to government figures, as Chinese tourists sought new experiences in cities such as Seoul, Tokyo and Paris.
While Hong Kong’s swift change of fortune — as recently as 2014 Harbour City boasted the world’s highest sales per square foot — is unlikely to be exactly replicated elsewhere, it contains lessons for luxury watchers on how quickly China’s appetite for upscale goods and experiences can shift.
Analysts attribute China’s changing habits to several factors, including exchange rate moves, but more importantly to evolving habits and tastes.
“The luxury experience is not just about shopping. In Hong Kong, all the luxury brands are here and some of the fast fashion brands too — but there is not much diversity at mid-price points and there are a limited number of museums or cultural activities,” says Aaron Fischer, head of consumer and gaming research at brokerage CLSA. “But go to Tokyo, Seoul, Paris or Milan and you have a much wider number of options.”
Changing habits among western shoppers are repeated with their Chinese counterparts, particularly in fashion. Younger consumers are increasingly interested in niche brands they discover online — and which may not even need any physical presence such as a flagship store to drive sales.
Global luxury brands have had mixed fortunes among Chinese consumers in the past year. According to FT Confidential Research’s Annual Chinese Outbound Tourism report, Chanel increased its popularity, with 26 per cent of respondents buying the brand, up from 20 per cent. Other winners include Coach, Hermès and Gucci, while Dior and Armani lost share.
Businesses catering to China’s luxury appetite are catching on. Despite the lack of queueing these days in Hong Kong’s Harbour City, last year the mall’s shift in strategy towards focusing on the overall experience helped pull in higher gross revenues than in the boom years — and bigger profits, too.
(Source: Financial Times )