Hong Kong’s luxury retailers are facing significant challenges as the number of wealthy Chinese tourists visiting the city has dropped. Instead of spending their money on expensive branded items, tourists now prefer trendy districts and Instagram-worthy spots. This shift in consumer behavior, coupled with the rise of competing shopping hubs like China’s Hainan island and the growing popularity of online shopping, has greatly impacted the demand for luxury goods in Hong Kong, and is reshaping the city’s visitor economy.
Rosanna Tang, an executive director at Cushman & Wakefield, explains that visitors in Hong Kong are now more interested in local culture and experience-based activities rather than excessive shopping. As a result, retailers have had to adapt their strategies. In the first half of the year, overnight and same-day visitor shopping spend reached only 55% and 18% of the levels seen in 2018, respectively. In response, retailers are placing more emphasis on food and beverage outlets to cater to changing consumer preferences.
One prominent retailer directly affected by these changes is the British luxury department store Harvey Nichols. The company recently announced that it would be giving up its lease on its flagship store in the upscale Landmark mall after nearly two decades. In a statement, the company acknowledged that Chinese tourists visiting Hong Kong are no longer as focused on shopping as they were before the pandemic.
In addition to the shifting preferences of Chinese tourists, there has been a significant decrease in the number of visitors to Hong Kong. Arrivals have only recovered to 60% of the levels seen in 2018, partly due to the anti-government protests in 2019 and the strict rules implemented during the pandemic. Consequently, Hong Kong’s total retail sales have decreased by approximately 20% compared to 2018.
To reduce reliance on luxury spending by Chinese shoppers, the government and tourism sector are making efforts to attract visitors to nature and leisure attractions. Projects such as large-scale festivals, green tourism in the outlying islands, and the creation of a hiking hub are being developed. However, the effectiveness of these strategies in enticing spending back to the city remains uncertain.
Apart from the decline in luxury retailers, brands like Valentino, Burberry, and LVMH’s Tiffany have also closed some of their stores in Hong Kong. Despite retail rents dropping about 40% since 2019, they still remain the highest in Asia.
Despite the challenges, there is still hope for recovery in Hong Kong’s luxury retail sector. Luxury hotel occupancy is strong, driven by the return of business travelers. Moreover, efforts are being made to rebuild ties between the West and Hong Kong after Beijing’s imposition of a national security law in 2020 and the strict Covid rules that led to an exodus of tens of thousands of people.
As the luxury retail landscape in Hong Kong continues to evolve, retailers will need to be agile and adapt to the changing demand. By focusing on experiences, local culture, and alternative attractions, they can successfully navigate these challenges and continue to attract both domestic and international visitors.
Useful Links:
1. Bloomberg: Hong Kong’s Luxury Retailers Search for a New Identity
2. The Wall Street Journal: Hong Kong Seeks to Rebuild Western Ties
