Luxury brands and jewelry retailers in Hong Kong are struggling to regain their growth as deep-pocketed mainlanders are shifting to other overseas destinations for their shopping expeditions.
Firms such as Prada (01913.HK), Chow Tai Fook Jewellery Group (01929.HK), Luk Fook (0590.HK) and Chow Sang Sang Holdings International (0116.HK) are all facing a challenge to boost their revenues.
Chow Sang Sang’s senior executives have projected stagnant sales for this year, given sluggish consumption sentiment among local and mainland shoppers. And Luk Fook also indicated that visitor traffic and sentiment have turned quiet.
The outlook is clearly not very rosy for luxury and jewelry retailers. Mainland citizens spent a total of US$3.2 billion on luxury goods purchases overseas during the week-long National Day Holiday in October. The amount represents a decline of over 20 percent from last year’s figure US$4.1 billion, according to a report from the World Luxury Association.
Meanwhile, Hong Kong, Macau and Taiwan accounted for just 5 percent of the total spending of mainland tourists. Europe is said to have made up 68 percent while North America accounted for 27 percent. Thus, it’s quite obvious that Hong Kong, Macau and Taiwan are no longer the top destinations for wealthy Chinese travelers.
The shift came amid easier access to European and American visas and some cheaper products in those markets.
During the National Day holiday period in 2013, Europe and North America are said to have taken up 65 percent and 22 percent, respectively, of Chinese tourists’ overseas spending. Hong Kong, Macau and Taiwan, meanwhile, accounted for 13 percent.
From the figures, we can see that Europe and North America witnessed market share increases of 3 percentage points and 5 percentage points respectively this year.
Due to the shift in mainlander spending, it’s estimated that Hong Kong has lost HK$1.2 billion of sales revenue of luxury goods during the holiday.
Actually, the Lunar New Year Festival is the peak season for luxury sales. Chinese travelers have spent US$6.9 billion on luxury goods during the 2014 spring festival, nearly 70 percent more than their spending during the National Day Holiday. And they bought some US$1.5 billion of luxury goods in Hong Kong, Macau and Taiwan in the same period.
Given this situation, Hong Kong authorities should come up with new ideas to attract more visitors. As the Hong Kong dollar is likely to stay strong next year, there is an added reason why more efforts are necessary to shore up the prospects of high-end retailers.
This article appeared in the Hong Kong Economic Journal on Dec. 29.
Translation by Julie Zhu
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