Hongkong'S Fashion Retailing Industry Is Losing Ground. More And More International Brands Are Closing Their Stores.

Hong Kong

The retail industry is losing ground, the United States

Ralph Lauren quietly closed its 20 thousand square foot flagship store in Hongkong last week, until now.

The stores that are located in cities that are not popular with Chinese tourists are closing down, and Hongkong is the worst hit area.

In just a month or so, at least 3 global fashion retailers have closed or planned to close the flagship store in Hongkong. Besides Ralph Lauren, the US casual wear brand Abercrombie&Fitch and fast fashion brand Forever21 also announced plans to close the flagship store in Hongkong, and Coach also closed its flagship store in the city last year.

According to the world clothing and shoe net, there will be more and more international brands will stop in Hongkong market expansion.

Luxury brands like LV, Gucci, Chanel and Dior have a high exposure rate in the city. LV has 8 stores in Hongkong, while Dior, including beauty products stores, has 15 stores.

Pascal Martin, a partner at OC&CStrategy consulting, explained that Hongkong could not continue to play the important role in the brand building of the Chinese mainland market.

In the past, many international brands expanded in Hongkong. The number of brands in Hongkong was more than that in its birthplace. But now, the brand has begun to return to the source of the brand, invest more flagship stores, emphasize the brand's foundation and history, and focus on serving the Chinese consumers who travel to the brand city.

According to the retail market observers, although the sales performance of Hongkong retailers such as Lian Crawford has been warmer lately, Hongkong is no longer the first choice and the necessary shopping city for Chinese tourists.

Now that some developed countries in Asia and Europe have relaxed visa requirements for mainland residents, Chinese tourists will choose to go abroad for shopping more.

At the same time, shopping centers and retail infrastructures in mainland China are also sufficient to meet the domestic consumption of Chinese consumers. Most importantly, the tense political situation in Hongkong and Mainland China is the main reason for the decrease of tourists in Hongkong.

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Laurence Lim Dally, general manager of Cherry Blossoms, Hongkong research and consulting company, said that Hongkong used to be a bridge between Mainland China and the world. Hongkong once had a strong influence on global fashion, culture and entertainment, but now the leading force is decreasing year by year.

In addition, the development of tourism in Hongkong is not comprehensive, and there is no shortage of irreplaceable unique attractions in Hongkong.

She believes that Hongkong will be trapped in this difficult situation for a long time.

OC&C Strategy expects that the wave of closing stores in Hongkong will last two years until the market recovers "normal". Many tenants are waiting for the lease contract to expire until the lease contract is expired.

Jocelyn Cheung, a research analyst at Rui information consultancy, said that because more and more tourists are becoming more and more cautious about consumption in Hongkong, she predicts that there will be more luxury stores in the future.

Jocelyn Cheung revealed that with the decline in rental interest rates, the weakening of consumer spending and the decline in the number of tourists, the major shopping areas once occupied by luxury brands are now replaced by popular brands. Recently, Xun group recently announced that its fast fashion brand GU will enter the Hongkong market next year and open more discount stores. In addition, the replacement of Coach flagship store is the sports brand Adidas. These examples illustrate the trend of Hongkong's gradual loss of luxury goods market.

Laurence Lim Dally said that the brand of a wide store network in Hongkong may be facing a dilemma. On the one hand, closing the stores that are located at high rents and low sales are good for the company's performance, but on the other hand, the high-profile closure of brand stores will damage consumers' impression of the brand.

She added that closing stores will always damage the brand image, but if a brand owns too many stores, it will actually damage the brand image due to flooding.

JoeLin disclosed that because of the sluggish retail environment, the rent in Hongkong this year is about half of the past few years.

During the peak period from 2013 to 2014, the rental of Russell street shops in Tongluowan, Hongkong was within the range of HK $2000 to HK $3000, but now the rent in this area has dropped to HK $1000 to HK $800 per square foot.

Similarly, the first Taiping Davies Real Estate Company said that the rent of street shops plummeted from its peak to 50% to 70% now.

According to a recent report from the company, tenant market has been worried about tenants for the first time in the tenant market in the past 20 years. At present, the rent of Main Street shops has been reduced by 30% to 40%, rather than the vacancy of many shops on main streets, and the number of vacant shops is increasing.

Hongkong's retail industry has fallen for 20 consecutive months.

According to statistics from the Hongkong census and Statistics Department, the estimated value of total retail sales in October 2016 was 36 billion 100 million yuan, down 2.9% from the same period last year.

The revision of the value of total retail sales in September 2016 is estimated to fall by 4% year-on-year.

Compared with the same period last year, the provisional estimate of total retail sales in the first ten months of 2016 decreased by 8.9%.

According to JoeLin, retail executive director of CBRE Hongkong branch, even though Hongkong's retail business has slowed down in October this year, the base number has been very low last year, so the rate of decline is not significant.

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