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Hong Kong’s Malls Are Turning Away From Luxury Brands

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To gauge how much the Hong Kong shopping experience is changing, take a walk through Pacific Place mall. Burberry Group Plc has shrunk its store and the space now also houses a Pure yoga studio and juice bar. Coach Inc. has been replaced by a tea company. Some of Louis Vuitton’s space has given way to a Southern California-style bar and restaurant.

Gone are the days when Chinese would queue up to get inside Prada, Gucci and Tiffany, and leave laden with luxury handbags and watches. The wealthiest now travel further afield, and even those who visit Hong Kong are cutting back. Average spending per overnight visitor, of whom three quarters come from China, dropped 8.8 percent in the island city last year. Luxury goods have been the hardest hit, with August sales less than a third of their April peak in 2013 before China cracked down on conspicuous consumption.

 

Buying habits of Chinese shoppers have also evolved, as they have become more comfortable buying luxury brands at home, or online, and have become more price sensitive when shopping abroad. This is having an impact on the $390 billion global luxury goods market and nowhere is it being felt more than at Hong Kong’s malls.

Since the downturn, Pacific Place owner Swire Properties Ltd. has refreshed its tenant mix to cater to changing spending habits and woo new visitors. It has signed 30 new tenants and doubled the number of food and beverage outlets in the past 18 months. Other landlords, including Wharf Holdings Ltd. and Hysan Development Co., are also including more lifestyle and food outlets.

Still, as visitor arrivals and retail sales start to rebound, there’s limited upside for Hong Kong’s landlords, said Patrick Wong, Bloomberg Intelligence property analyst in Hong Kong. “Receipts might be stable and resilient, but if things turn better, they may not be able to capture the growth there,” he said.

Source: Bloomberg

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