Photograph: Isaac Lawrence/Getty Images
After making a splash with his Menswear Art Director debut at Louis Vuitton in Paris in June, Williams Pharrell will travel to Hong Kong on November 30 to present his early autumn 2024 collection for the brand. The choice of venue for this show sends a clear message: Hong Kong is back on the map of international luxury brands.
The Louis Vuitton show will be held at the Avenue of Stars, adjacent to the Tsim Sha Tsui waterfront in Victoria Harbour. The brand announced in a statement this week that it will work with the K11 Musea retail complex under the billionaire Zheng family’s New World Development to revamp the K11 Victoria Dockside, which will also be streamed live on local digital billboards and globally via Louis Vuitton’s social media channels.
More interestingly, on the eve of Louis’s Vuitton show, Dior, another luxury fashion house under LVMH Group, also announced that it would come to Hong Kong next year to present the 2024 early autumn men’s clothing series.
Hong Kong Avenue of Stars, the venue for Louis Vuitton’s upcoming fashion show. Photo by Louis Vuitton
After nearly three years of customs closure, the Chinese government decided on February 6 to fully reopen the border between the mainland and Hong Kong, followed by an influx of tourists from the mainland.
“Hong Kong, Macau and Hainan have seen strong recoveries this year. In these regions, we have seen triple-digit growth compared to the low levels [last year], and while not yet at pre-pandemic levels, the pace of growth is quite fast,” said Cartier President and CEO Cyrille Vigneron in the second-quarter earnings release of parent company Richemont on Nov. 10.”
According to the latest data from the Hong Kong Census and Statistics Department, Hong Kong’s retail sales in September increased by 13% year-on-year.
After three years, can Hong Kong regain its former glory? The severe restrictions associated with the new crown epidemic have led to a severe recession. During the outbreak, Hong Kong has not been immune to the exodus of expatriates, store closures and increased competition from other destinations that have occurred elsewhere in China.
Photo by Xinhua/Wu Xiaochu
However, experts say Hong Kong is well-positioned to benefit from the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), which was signed in 2017 to strengthen ties and cooperation between cities in southern China. Hong Kong is the most international city in the Greater Bay Area. It has a good business environment and ushered in the new transportation infrastructure that the Greater Bay Area has prioritized. The city is working to restore its image, whether through promotional activities (such as 500,000 free tickets) or cultural events.
According to HSBC’s estimates, luxury sales in the Asia-Pacific region (excluding mainland China) are expected to grow by 20% next year, driven by Hong Kong, Macau, South Korea and Japan. “The reason why Hong Kong is still doing well next year is that there is still more than 1/3 of the Chinese tourists going to Hong Kong in 2019. So you can still recover some of the lost tourist traffic,” said Erwan Rambourg, managing director and global head of consumer and retail equity research at HSBC.
After a series of renovations, the quality of luxury retail space in Hong Kong is also higher than it was before the new crown epidemic. Among them, the Harbour City store, which was renovated by Hermes in 2020, has nearly doubled in size. Dior also opened an expanded flagship store on Canton Road in August 2022. Both are located in Tsim Sha Tsui, which is the second most expensive retail area in the world by 2022 rental value.
Real estate developer New World Development has been opening high-end complexes such as Eleven Sky at the Hong Kong International Airport, in addition to benefiting from the Greater Bay Area initiative as the project is located near the Hong Kong-Zhuhai-Macao Bridge, which opened in late 2018.
Rambourg said there has been some consolidation in the retail sector. For example, Cartier, Van Cleef & Arpels, Earl and other brands have closed stores and relocated 1881 Heritage shopping centers. “There used to be 8. nine luxury shopping destinations that were hot spots. Now, if you’re a mainlander, it’s basically going to [Hong Kong’s largest shopping mall] Harbour City, and if you’re a local, it’s going to Land Plaza or the IFC.” Rambourg said.
Image source: reuters
Benjamin Vuchot, chairman and chief executive of DFS Group, a luxury retailer owned by LVMH, said: “Hong Kong is back with some changes, but these changes are driving the market. The retail industry has consolidated, but there has also been a lot of renovation and investment.”
The company has four stores in Hong Kong and eight in Macau. During the outbreak, DFS revamped DFS’s T Plaza beauty shop on Canton Road with a concept called The Beauty Collective, which aims to introduce the new brand to local customers. “This is the most comprehensive and well-known beauty shop in Hong Kong and one of the most beautiful in the world,” Vuchot said.
# Increased competition in peripheral retail
A big challenge for Hong Kong is increased competition from mainland cities such as Hainan and Shenzhen, as well as from its existing Chinese fashion capital rivals Shanghai and Beijing, and smaller cities such as Hangzhou, Chengdu and Guangzhou.
Shenzhen is another increasingly popular destination for luxury goods, and Chanel recently held a holiday series here. Since 2021, Shenzhen Bay Wanxiang City Shopping Center has been occupied by many luxury brands including Chanel. Shenzhen, the tech hub, will have 113 billionaires in 2022, more than New York, according to an annual ranking by privately-owned Chinese firm Hurun Report.
Photo by Chanel
Chanel and Chanel SAS fashion president Bruno Pavlovsky said to Vogue Business before the catwalk show. “We were in Los Angeles before, it was about technology, movies and the entertainment industry in general. We can find the same touch point in Shenzhen-a city full of vitality and hope.” However, experts believe that Shenzhen still has a long way to go compared with Hong Kong in the field of fashion.
Due to its free trade port status, Hainan Island has also become a center of local luxury consumption during the epidemic. Now, it is building its own international customs system, which may change the current situation of luxury players delaying their entry into Hainan due to the existence of Daigou, traders who take advantage of cross-border price differences to resell luxury goods on the gray market.
Image source: Xinhua
The latest report Altagamma by management consultancy Bain & Company and the Italian Luxury Association predicts that Hong Kong and Macau are expected to see a “boom” in the first six months of 2024 as Chinese tourists continue to flood into the territory, but this growth is expected to slow in the second half of the year as Hainan takes a larger share of luxury consumption.
Hainan is currently operating under a duty-free licensing model and its status will change by the end of 2025. Jean-Jacques Guiony, chief financial officer of LVMH, told analysts in October this year: “The way brands operate in this environment will be completely different from [now]. Given the large number of people visiting Hainan each year, it is worth considering it as an important market, so all our brands are considering opening stores in Hainan in a selective way. No decision has been made yet, except for DFS.”
DFS plans to open a 128,000 square meter store in Yalong Bay, Hainan in 2026, with more than 1,000 luxury brands, including LVMH brands. Guiony said: “In this way, DFS will basically reproduce what they did in Macau about 15 or 17 years ago, which is to allow luxury brands to enter the market in a controlled and safe way.”
Image source: DFS
Rambourg pointed out that Hainan is very different from Hong Kong, which is more suitable for business travelers. “Hainan is a tropical island (often referred to as China’s Hawaii), in contrast to Hong Kong, which is a very vertical city,” he noted.
Experts say Hong Kong can rely on its character, quality shopping experience and impressive food scene-it has more Michelin-starred restaurants than New York (78 and 71 respectively in 2023)-to beat the competition.
“with the lifting of travel restrictions, the culinary scene in hong kong remains vibrant and enthusiastic, while the hotel industry is picking up its pace,” said Gwendal Poullennec, international director of the michelin guide.” French chef Anne-Sophie Pic, who has three Michelin stars, opened a new restaurant in a Landmark shopping center earlier this month in partnership with crystal maker Baccarat.
Photo by Kalel Koven
Art is also a unique bargaining chip in Hong Kong: the new museum M opens in 2021, and Cartier held an exhibition at the Hong Kong Palace Museum earlier this year. Art Basel is back in full swing in March this year, and Christie’s will open its new headquarters next year in a rocket-shaped building designed by Zaha Hadid Architects.
Photograph: Berk Ozdemir/Alamy, Cartier, Art Basel
Despite increasing competition, Hong Kong’s maturity remains attractive. “In terms of tourism intentions, it is still one of the top three tourist destinations for Chinese people today. Hong Kong still has a kind of myth and charm,” said DFS’s Vuchot.
Despite the strong rebound, Hong Kong has yet to fully recover after a three-year hiatus in new crown-related restrictions. During this period, many brands integrated retail networks and renovated stores. Competition to attract luxury shoppers is fierce, especially from Hainan, whose status is set to change by 2025, and Shenzhen, home to a host of new billionaires and large complexes. Nevertheless, Hong Kong’s position as a commercial and cultural center has a strong appeal for luxury brands.
(Source: VOGUE BUSINESS)
