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Hong Kong retail has lost its edge

Sep 16, 2015

Shopping area in Hong Kong

Hong Kong has lost its edge as the go-to destination for international tourists seeking retail therapy.

In a presentation to the 22nd CLSA Investors Forum, CLSA’s  head of consumer and gaming research Aaron Fischer, said luxury retail prices in Hong Kong are now higher than in other markets and if they stay that way “the retail market will suffer”.

He cited an example of a Louis Vuitton handbag priced 20 per cent cheaper in Tokyo than in Hong Kong.

Tourists – especially those from the Mainland – are now considering the price differential with Europe and other Asian destinations – and concluding there are more exciting tourist attractions, or new experiences, so deciding against Hong Kong.

He said while there is no danger of the Hong Kong retail market “collapsing” – it would take threats to personal safety from terrorism or a pandemic to cause that – the sector needed to adjust.

He said Hong Kong luxury brands were over-stored here. Brands like Louis Vuitton and Prada had about 10 stores in Hong Kong – and more in Macau – yet in cities like New York they had just two or three. If the profitability of these brands in Hong Kong was to be maximised, store networks would need to be cut by 20 or 30 per cent.

“While sales declined, it does not mean these stores are loss-making. They might close one or two stores but they definitely won’t leave Hong Kong,” he added.

The 22nd CLSA Investors’ Forum provides more than 1400 global fund managers and 230 leading listed corporations from 30 countries a platform for discussion and debate on market drivers including foreign policy and currency volatility; financial, political and structural reform; capital preservation, corporate governance and more.

Source: insideretail.asia

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