Revitalizing Hong Kong’s Status as the Crown Jewel of Luxury Retail in the Next Normal
Read time: 5 minutes
Once a beacon of luxury shopping, Hong Kong has seen a significant shift in its retail landscape fueled by overall weak demand — with high-end malls seeing drops in occupancy and renowned international brands readjusting their presence. How have brand owners and key real estate players been adapting to and revitalizing Hong Kong’s next normal of luxury retail?
Recently, GLG had the honor of having Jean Lahirle, CEO of Greater China at Zadig & Voltaire, and Eric Yau, former Chief Strategy Officer at Link Real Estate Investment Trust, share their takes on key topics such as:
- Hong Kong’s luxury retail market outlook from 2019 to 2022 and predictions regarding post-COVID and border reopening impact on pricing, spending, and demand trends; popular categories; industry challenges faced by key players; and post-pandemic sales recovery momentum.
- Trends in occupancy for high-end brands in major shopping malls, including Harbour City, Times Square, Elements, and The Landmark, from 2019 to 2023.
- Impact of new entrants to the rental competitive landscape — views on the addition of K11 MUSEA.
- Spotlight on luxury brands’ key considerations in store openings, including any new elements that would be involved.
- New monetization business model for proprietors and considerations for tenants.
- Outlook for retail space entering a new cycle of enhancement — K11 MUSEA’s upgrade potential vis-à-vis future positioning of Harbour City and IFC.
About the GLG Webinar Panelists
CEO of Greater China at Zadig & Voltaire
Jean Lahirle is the current CEO of Greater China at Zadig & Voltaire. With over 20 years of experience at top luxury fashion companies across APAC regions, he has held various senior roles such as Managing Director or President for Lanvin, Chanel, Celine, and Escada, etc., with a focus on the China and Korean distribution landscape in the past 10 years.
Former Chief Strategy Officer at Link Real Estate Investment Trust
Eric was the Chief Strategy Officer at Link REIT, one of the largest retail-focused real estate investment trusts in the world, responsible for developing and executing corporate strategic initiatives, portfolio management, investor relations, sustainability, and external affairs. Before joining Link, Eric worked in investment banking and corporate management at DBS Asia Capital, CLP Holdings, UBS Investment Bank, and Jardine Fleming.
Featured Questions from GLG Moderator
- What is one key question that may set the scene for Hong Kong’s competitive status in a luxury retail market?
- What have been the major transitions in terms of pricing, supply, and demand dynamics in the luxury retail market in Hong Kong over the past few years, and how has the market coped after the pandemic?
- What is your conclusion regarding revitalizing Hong Kong’s status as the crown jewel of luxury retail in the next normal?
Key Takeaways from the GLG Guest Panelists
“Hong Kong will remain a challenging market despite the good work done by the retailers to attract and retain much more local customers. As of today, we are not back at the pre-June 2019 levels, especially with the huge decrease in mainland Chinese customers.”
— Jean Lahirle, CEO of Greater China at Zadig & Voltaire
“Hong Kong has an incredibly high concentration of luxury shops within the city. A brand could have half a dozen or more stores scattered over Tsim Sha Tsui, Causeway Bay, Admiralty, and Central districts. With so many stores within close proximity, it is very difficult to distinguish one luxury mall from another. How can a landlord make sure you buy the luxury handbag from its mall and not elsewhere? How can a landlord reinvent itself continuously to attract shoppers? The challenge is particularly acute now that shoppers are becoming pickier and tourist spending is shrinking.”
— Eric Yau, former Chief Strategy Officer at Link Real Estate Investment Trust
- A Challenging Market
The luxury retail market in Hong Kong has faced challenges due to the COVID-19 pandemic and other factors.
- Impact on Chinese Customers
The pandemic and other geo-specific factors led to a decline in mainland Chinese customers visiting Hong Kong for luxury shopping.
- Focus on Local Customers
Luxury brands have shifted their focus towards the local customer base in Hong Kong to sustain their business during difficult times.
- Market Recovery
Despite the challenges, the luxury market in Hong Kong has shown signs of recovery. In 2021, top luxury brands were at around 70% of their pre-2019 levels, which increased to around 80% in 2022.
- Pricing Strategy — Luxury Brands
Luxury brands have been increasing prices, typically once or twice a year, especially during new collection launches. Factors like raw materials, craftsmanship, and exchange rates influence price adjustments.
- Price Difference Reduction — Luxury Brands
The price difference between luxury goods in China and Hong Kong has significantly shrunk in recent years. Some brands have implemented price harmonization, resulting in no price difference or a maximum difference of 15%.
- Landlord Perspective — Luxury Retail
Landlords in both Hong Kong and mainland China have faced challenges as tenants struggle in the market. New malls and duty-free zone players in mainland China are very much worth noticing.
Hong Kong remains one of the world’s top luxury shopping destinations, with a unique mix of international brands and local favorites. However, the industry is facing some significant challenges due to factors such as rents and labor and the impact of the pandemic, along with new developments in alternative destinations in surrounding areas, all of which have taken a toll on foot traffic and overall sales. The industry is also grappling with shifts in consumer behavior, as more people turn to online shopping or other nontraditional retail formats.
*Disclaimer: The content above is consolidated from a GLG Complimentary Webcast and represents the personal views of the guest speakers. GLG does not comment, endorse, or have responsibility for the truthfulness, relevance, or completeness of the views expressed in the article.
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