Hong Kong Luxury Reset: Hong Kong, once a bustling haven for affluent Chinese shoppers, is undergoing a transformative shift in its luxury retail landscape. The city, known for its multi-brand department stores and ultra-luxury brands, was a global outlier, defying the trend of declining demand.
The key driver of this prosperity was its allure to high-spending mainland visitors. However, the scenario has changed significantly due to various factors, including the rise of competing luxury shopping destinations like Hainan Island, evolving consumer preferences, and the surge in online shopping.
Rosanna Tang, an executive director at Cushman & Wakefield, notes a significant shift in the focus of visitors in Hong Kong. The traditional “shop till you drop” mentality has evolved into a desire for local culture and experience-based touring. Tang highlights that overnight and same-day visitor shopping spend has dwindled to 55% and 18% of 2018 levels, respectively, during the first half of the year. This shift has prompted retailers to redirect their focus toward food and beverage outlets to cater to the changing preferences of visitors.
At the forefront of this transformation is the iconic British luxury department store, Harvey Nichols. Its owner, Dickson Concepts, recently announced the decision to give up the lease on its flagship five-level store in the upscale Landmark mall after nearly two decades. The statement from the company emphasizes that Chinese tourists coming to Hong Kong are no longer singularly focused on shopping, a stark departure from the pre-pandemic scenario.
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The decrease in visitors is also apparent, with arrivals only recovering to 60% of the levels in 2018. This is attributed to various factors, including the anti-government protests in 2019 and stringent rules during the pandemic. As a consequence, Hong Kong’s total retail sales have experienced a significant downturn, down approximately 20% from 2018 levels.
In response to the changing landscape and to reduce reliance on luxury spending by Chinese shoppers, the government and the tourism sector are actively attempting to woo visitors towards nature and leisure attractions. Initiatives range from large-scale festivals to green tourism in outlying islands and the creation of a hiking hub. However, the effectiveness of this strategy in luring back spending remains uncertain.
Despite these challenges, Hong Kong has managed to reclaim its position as the number one city in per-capita spending on luxury goods this year, surpassing Switzerland and Singapore. Euromonitor International anticipates the city’s recovery to pre-COVID personal luxury goods sales levels by the middle of 2024.
The closures of luxury stores, including Harvey Nichols, signal a repositioning within the city’s luxury sector. Brands like Valentino, Burberry, and LVMH’s Tiffany have also shuttered some of their stores in Hong Kong, where despite a 40% drop in retail rents since 2019, they remain the highest in Asia.
Industry experts express optimism that the luxury sector will see improvement, though returning to previous levels may be challenging. Caroline Reyl, Head of Premium Brands at Pictet Asset Management, acknowledges the over-distribution of major luxury labels in the past and suggests that as some brands reduce their exposure to Hong Kong, the void may be filled by others.
Luxury giants like LVMH-owned Louis Vuitton are betting on Hong Kong’s future prospects. Despite relatively quiet stores compared to pre-COVID times, Louis Vuitton recently hosted a star-studded fashion show alongside Hong Kongs harbor, signaling a potential luxury renaissance in the former British colony. Other brands like Chanel, De Beers, and LVMH’s Bulgari have also demonstrated confidence by opening flagship stores in strategic locations within the city.
Property developer Hong Kong Land, owner of the Landmark mall from which Harvey Nichols is vacating, reports that tenant sales and footfall in its city center malls have returned to pre-pandemic levels. However, the dynamics have shifted, with crowds primarily engaging in restaurant visits and festive displays, rather than shopping for designer goods.
In the midst of these changes, Hong Kong faces the challenge of adapting to a new era in luxury retail. While closures and shifts in consumer behavior present hurdles, there are opportunities for the city to redefine its appeal to tourists and cultivate a more diversified visitor economy. The resilience of Hong Kong’s luxury sector will likely hinge on its ability to navigate these challenges and embrace the evolving dynamics of global luxury retail.
Our Reader’s Queries
Is LV cheaper in Hong Kong?
Indeed, the prices are quite affordable and the added benefit of no taxes is certainly a plus. However, it’s important to note that the store can get quite crowded at times, with both tourists and locals vying for a spot. As a result, it’s not uncommon to experience a bit of a wait when seeking assistance from a sales associate.
When was Hong Kong liberated?
Under British rule, Hong Kong celebrated Liberation Day on the last Monday of August. This day was dedicated to honoring the liberation of Hong Kong from Japanese occupation on August 30, 1945.
When did Hong Kong go back to China?
On the stroke of midnight on 1 July 1997, Hong Kong was officially handed over from the United Kingdom to the People’s Republic of China. This marked the end of 156 years of British rule in the former colony, which had begun in 1841.
Why is Hong Kong now a part of China?
In 1984, the UK and China engaged in diplomatic negotiations that led to the Sino-British Joint Declaration. As per the agreement, the UK agreed to transfer the colony to China in 1997. In return, China guaranteed to maintain Hong Kong’s economic and political systems for 50 years after the transfer. This agreement ensured a smooth transition of power and stability in the region.