20 January 2019
Giordano does not rely on mainland tourists in Hong Kong as it has already entered the mainland market. Photo:
Giordano does not rely on mainland tourists in Hong Kong as it has already entered the mainland market. Photo:

Why Giordano is losing out to H&M and Uniqlo

Call it a Giordano dilemma.

The Hong Kong-based apparel retailer has struggled to survive in the competitive home market, which, instead of benefiting from the influx of mainland visitors, is being hurt by it.

Last week, chairman and chief executive Peter Lau Kwok-kuen became the first retailer to voice out unwelcoming remarks to individual mainland travellers, who are being blamed for driving up commercial rents in Hong Kong to abnormal levels.

His company reported a 48 percent drop in operating profit in Hong Kong to HK$70 million. Despite closing nine stores, the retailer paid 14 percent more in rents, reflecting the high upward rental pressure in prime locations.

Rentals accounted for 30 percent of revenue, compared with the group’s average rental ratio of 22 percent.

As a result, Giordano will close yet another store in Causeway Bay after shuttering one last year, leaving only one in the shopping district that it used to dominate.

As it minds its rental costs, Giordano is no longer a welcome brand for landlords. Apple’s store in Hysan Place, for example, is believed to be the single reason why landlord Hysan was able to produce a market-beating 22 percent growth in rentals last year.

Giordano said it would explore the feasibility of closing more shops in core districts and moving to residential areas. The new strategy may not work out quite well, however.

In the shopping mall near my residence, I noticed that Giordano was among the first batch of tenants to close shop after its three-year tenancy expired.

To be fair, K-Swiss and I.T. will also be gone, but not its lower-price-oriented rival Bossini, and definitely not Uniqlo, which is one of the most popular shops in my area.

It is said that Uniqlo used to learn from Giordano in the days when Jimmy Lai Chee-ying was the owner. So why did Giordano lose out in the race?

That, I guess, is part of its mass-market dilemma. In the past decade, Giordano has upgraded itself into a designer store, with the launch of Giordano Ladies and occasional cooperation with top designers in Asia and fashion icons like Hello Kitty.

I could still vividly recall its Halloween-themed T-shirts in 2008, which included “Layman Brothers” tees featuring two grim reapers and the deliberately misspelled “Meririll Lynch” tees with the famous bull logo dripping blood on the floor.

It also had a baseball-themed series, but that one failed to attract many buyers despite a 50 percent cut in prices.

I feel bad for Giordano, which seems to be lagging behind its more popular rivals such as H&M, Zara and Uniqlo.

A ripple effect could be on our local young designers, whom the government is happy to support with more funding and resources in hopes of creating another Vivienne Tam.

Let’s just hope our budding designers could avoid the Giordano dilemma and survive the high cost of the business before they get famous.

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EJ Insight writer

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