Editorial

The state of luxury in Hong Kong

As Pharrell prepares to show his latest collection for Louis Vuitton in Hong Kong, journalist and 'Vogue Business' contributor, Gemma A. Williams, takes a closer look at luxury in the city and the region's preparations for a post-pandemic retail renaissance
30th Nov 2023
Editorial The state of luxury in Hong Kong

The news that Louis Vuitton is debuting its Men’s Pre-Fall show in Hong Kong might have come as a surprise to some, but for those based in the 'Fragrant Harbour', it was a clear sign of what they’ve been feeling for months: Hong Kong is in recovery mode, and ready to shake off the doom and gloom of the pandemic. 

"The Louis Vuitton show is the talk of the town right now," says Elisa Harca, Co-Founder and CEO of Red Ant Asia and Vice Chair of the British Chamber Retail Committee, Hong Kong. “Brands want to do their activations here. It’s an exciting time and Vuitton putting on a show here shows that Hong Kong has a really strategic role in the overall brand marketing of any company in APAC.” 

And there are more cultural bright spots than Pharrell Williams’ upcoming blockbuster show at K11 Victoria Dockside. In West Kowloon Cultural District, the M+ exhibition on fashion icon Madame Song is drawing visitors; Clockenflap Music & Arts Festival expects to welcome thousands of guests on 1st December following Louis Vuitton’s extravaganza. 

Furthermore, this week Dior announced that it will debut its Men’s Pre-Fall collection in Hong Kong too, marking its return following a display in 2016. These cultural moments are, no doubt,showing confidence in the region and encouraging people to return to a more normal lifestyle. With that, of course, comes spending. This week, Rodolphe Ozun, Director of Financial Communications at LVMH told WWD that Hong Kong (and Macau) are defying the French luxury conglomerate's recently reported slowdown in growth with “a very strong increase in store traffic and sales.”

According to the General Chamber of Commerce, total retail sales in Hong Kong increased by 20.7% in the first half of 2023 compared to the same period last year. It said the medium- and long-term forecast for Hong Kong and China's consumer market is positive. This month, the government said that Hong Kong's economy expanded a notable 4.1% in the third quarter from a year earlier – beating growth of 1.5% in the second quarter and 2.9% in the first. 

In fact, Euromonitor’s August 2023 report World Market for Luxury Goods found that Hong Kong regained its spot as the market with the highest per capita expenditure on luxury goods; in terms of post-pandemic growth in the APAC region, luxury jewellery was the front-running market. The report also projected that the city will regain pre-pandemic levels of luxury sales by mid-2024.

The region has always been an important springboard for wider Asian expansion, particularly for British brands, and many are pragmatic about its long-term recovery. Jack Harrison, Chief Operating Officer of ArcOn Brands, a consultancy helping companies launch in Asia, points out numerous reasons for Hong Kong residents to be upbeat including its strong talent pool, low income tax and financial incentives. 

"We still see it as a really important gateway to China but not only that, it’s the most convenient airport in the world," says Harrison. "It is clearly a massive market in itself from a luxury perspective and the density of high net worth is exceptional. Many people assume that Switzerland or Dubai lead this, but in fact, as Euromonitor found, Hong Kong has regained its spot as the market leader for expenditure on luxury goods”.

One luxury brand benefitting from these is historic British retailer Fortnum & Mason. The company's CEO, Tom Athron, said that its outpost in the region is seeing "brisk trade", but that it has had to "adapt and adjust". That includes working with local businesses on corporate gifting. "You’ve got to remember that Hong Kong is only six months out of [Covid-19]," he says. "I was still wearing a mask the last time I visited. You can't go back to being normal on day one, it takes time to return to how people work and shop.”

So far, this new normal has well documented complications. The government revised the full-year economic growth forecast down to 3.2% from an earlier estimate of a 4% to 5% range. It also said inbound tourism would be driving growth for the rest of the year. Figures show that during the first half of 2023, Hong Kong recorded nearly 13 million arrivals; by comparison, it’s less than half the numbers pre-pandemic. 

The State of Fashion 2024 by Business of Fashion and McKinsey & Company suggests there will be a shift in values when vacationing, resulting in travellers having different expectations – even as purchasing remains high up on the agenda. Hong Kong already faces fierce competition from the duty-free island Hainan, as well as, the tax exempt Macau, which are both attractions for visitors from the Chinese mainland. 

Post pandemic, consumers demand "a deeper, more immersive [shopping] experience," suggests Head of Consumer and Retail at KPMG China, Anson Bailey. "It’s a reminder to the retailers that they have to lift their game." On that front, Hong Kong has much to offer in year ahead. Angelic Leung, Head of Consumer Products at InvestHK, which supports overseas businesses to set up and expand in the area, says there are "many new shopping malls and experiences coming online." For example, 11 Skies is opening in 2024 – a one-stop 'retailtainment' and tourism landmark located near Hong Kong International Airport. 

Similarly pegged to open mid-next year is the first instalment of The Twins from Sogo Operator Lifestyle International in Kai Tak. This will feature over 1 million square feet of retail space including 700 shops, plus there’s the government-backed Kai Tak Sports Park. Bailey picks October's new development Airside, again in Kai Tak, as a case in point: “It’s part of the Nan Fung Group which owns The Mills and has embraced sustainability and community. It’s got great new concepts in F&B and a nice tenant mix that appeals to tourists, locals and young Gen Z.”  

Anne Geronimi, Group Communication & Sustainability Director at brand partner Bluebell Group, is adamant that given its strong consumer base, "brands aren’t shying away from Hong Kong", but that the focus has shifted to the local shopper over tourist spend. "In the past, it was seen as a test to go into China. I don't think that’s the case today," says Germonimi. "The local audience and the weight that it represents in China is still important. It’s up to brands to adapt to that reality."

Hong Kong has a lot of uniqueness to offer from a behavioural and wellness perspective, she continued, which can be leveraged by brands. Plus, there’s room for innovation in the sectors that “fit the Hong Kong consumer lifestyle” especially in food & beverage, and athleisure. The outdoors appears as a theme in The State of Fashion 2024; the report stated that outdoor brands will likely launch lifestyle collections – an area for brands to consider. Geronimi expected a rise in co-branded spaces including cafes, adding: “Consumers [there] are looking for something a little bit more sophisticated and affordable but that can fit into life on the go.”

In the run up to its first show in the city, Louis Vuitton’s CEO Pietro Beccari has been equally upbeat. “Hong Kong is having a second youth,” he told the South China Morning Post. Now, with the addition of a show from Dior, what could be a bigger luxury stamp of approval?

> If you would like to learn more about Walpole's international work, please email our Public Policy team at [email protected]

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