Hong Kong luxury retailers adjusting to drop in high-spending Chinese tourists

Cushman & Wakefield

17/12/2023 23:00

* 
      Visitor arrivals recovered to just 60% of 2018 levels
    

        * 
      Tourists increasingly looking for experiences beyond
shopping
    

        * 
      Luxury department store Harvey Nichols closing flagship
shop
    

  
    By Farah Master
       HONG KONG, Dec 18 (Reuters) - Hong Kong's luxury
retailers are adapting to fewer wealthy Chinese shoppers
visiting the city and a shift towards tourists flocking to
Instagram-coveted spots in trendy districts rather than
splashing out on pricey branded gear.
    Before the pandemic, the Chinese special administrative
region had bucked global trends of declining demand for
multi-brand department stores and ultra-luxury brands largely
due to its attractiveness to high-spending mainland visitors.
    But the rise of competing shopping hubs like China's Hainan
island, changing consumer preferences and a rise in online
shopping have fundamentally changed demand for luxury goods in
Hong Kong and are starting to reshape the city's visitor
economy, according to industry experts.
    "The focus of visitors in Hong Kong has shifted from 'shop
till you drop' to a greater desire for local culture and
experience-based touring," said Rosanna Tang, an executive
director at Cushman & Wakefield.
    Overnight and same-day visitor shopping spend was at 55% and
18% of 2018 levels respectively in the first half of the year,
said Tang, prompting retailers to focus more on food and
beverage outlets.      
    British luxury department store Harvey Nichols is at the
forefront of the changes. Its owner Dickson Concepts  0113.HK 
said last month it would give up its lease on its flagship
five-level store in the upscale Landmark mall in the city's
centre after almost two decades.
    "Chinese tourists coming to Hong Kong are no longer focused
on shopping as they used to be before the pandemic," the company
said in a statement.
    There are also fewer visitors, with arrivals recovering to
just 60% of the levels in 2018, before anti-government protests
in 2019 and stringent rules during the pandemic. 
    Hong Kong's total retail sales are down about 20% from 2018
levels and in an effort to reduce the reliance on luxury
spending by Chinese shoppers, the government and tourism sector
are trying to woo visitors to nature and leisure attractions.
    Business chambers and companies are also trying to rebuild
ties between the West and Hong Kong after Beijing's imposition
of a national security law in 2020 and draconian COVID rules
prompted an exodus of tens of thousands of people.
    The government said this month that it is developing several
projects from large-scale festivals to green tourism in the
outlying islands and the creation of a hiking hub. 
    It remains unclear how effective that strategy will be to
lure back spending. Luxury hotel occupancy is strong but on the
back of the return of business travellers.  
    Harvey Nichols closure comes after brands including
Valentino, Burberry  BRBY.L  and LVMH's  LVMH.PA  Tiffany shut
some of their stores in Hong Kong, where retail rents are the
highest in Asia despite having dropped about 40% since 2019. 
    
    REPOSITIONING
    Despite the closures, Hong Kong reclaimed its position as
number one in per-capita spending on luxury goods this year,
ahead of Switzerland and Singapore said Euromonitor
International, which expects the city to recover to its
pre-COVID personal luxury goods sales levels by the middle of
2024. 
    Snarled traffic has returned across commercial districts
after a three-year lull, while drinkers and revellers are
trickling back into the city's bar districts. 
    Things will improve in the luxury sector, said Caroline Reyl
Head of Premium Brands at Pictet Asset Management, which owns
shares of LVMH, but it will likely be challenging to return to
previous levels due to competition from the Chinese tropical
island of Hainan.
     "There was probably some over-distribution in the past,"
she said, meaning that major luxury labels over-saturated Hong
Kong with their stores. "As some luxury brands have reduced
their exposure to Hong Kong, that space will be filled by other
brands."
     LVMH-owned Louis Vuitton is among those betting on the
city's future prospects. 
    Even as stores remain quiet versus queues outside pre-COVID,
Louis Vuitton held a star-studded fashion show alongside Hong
Kong’s harbour last month to signify a luxury renaissance in the
former British colony. 
    Chanel opened a new flashy two-storey retail space in
Causeway Bay this year, while De Beers and LVMH's Bulgari both
opened flagship stores in the popular Tsim Sha Tsui district. 
    Property developer Hong Kong Land, owner of the Landmark
mall being vacated by Harvey Nichols, said tenant sales and
footfall in its city centre malls have returned to pre-pandemic
levels.
     On a recent visit to the Landmark, crowds packed
restaurants and thronged the festive display areas in the 
lobby. Few, however, were shopping for designer gear.
    "It's a true shame that Harvey Nichols is leaving Landmark,
but the fact of the matter is that they really have no
business," said 67-year-old Sarah Ng, who was walking through
the mall. "It's so high-end, but they have no customers."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Luxury slowdown prompts fears of inventory pile up over key
holiday season    https://www.reuters.com/business/retail-consumer/luxury-slowdown-prompts-fears-inventory-pile-up-over-key-holiday-season-2023-12-13/
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Farah Master in Hong Kong; Additional reporting
by Dorothy Kam, Clare Jim, Donny Kwok and Jessie Pang in Hong
Kong, Casey Hall in Shanghai and Mimosa Spencer in Paris;
Editing by Jamie Freed)
 ((farah.master@thomsonreuters.com; +852 3462 7709;))