The article discusses the characteristics of luxury market in Hong Kong & the factors behind its fast growth. The article also covers the study of various consumer segments and their important purchasing habits.
Hong Kong has a deep rooted love for luxury and reason being the rich and wealthy Shanghaies and Chinese immigrants. Shopping is way of life in Hong Kong and the market is worth more than $ 3.5 billion. Hong Kong is duty free zone and thus luxury goods here are cheaper than anywhere else in Asia. Luxury brands are hugely concentrated here. Gucci has eight stores in Hong Kong but three in New York and Milan and six in Paris in London. Similarly Herms has seven stores in Hong Kong, two in New York, three in Paris, one in Milan and five in London. Hong Kong is at its way of life stage of the spread of luxury Model (Chaddha & Husband, 2006, p. 105). Hong Kong's luxury market started blooming in the 1970s when its economy started picking up. Most of the luxury sales came from nightclub hostesses, whose status was judged by the brands they used to carry and who later on returned these goods for refunds. In 1980s and 1990s a lot of money started pumping into the local markets which lead to revolution in the luxury industry. The new money brought Hong Kong into the show off stage. A lot of Japanese tourists also led to the rise of sales of these brands. In a recent survey report from the Boston Consulting, it was observed that even now, a lot of shoppers from China prefer to spend a lot of money in buying luxury goods from Hong Kong as they not only find these goods cheaper here but also prefer it because of authenticity, wider selection and better services.
An important characteristic of luxury retail in Hong Kong is franchising. Most of the luxury brands used to sell through local agents in early 90s though most of the big brands started managing their brands post 1997. A few brands are still being managed by local agents including Kenzo and Givenchy. Like China and Japan, the first spots for luxury retail in Hong Kong too were five Star Hotels, the remarkable ones being Mandarin Oriental & Peninsula Hotel. Later on upscale mega-malls like Ocean Terminal and plush shopping centres like Landmark also became sites of attraction for luxury shoppers in Hong Kong.
In their book "The Cult of the Luxury Brand" Chaddha & Husband (2006, pp. 122-27) have identified three major consumer groups in Hong Kong: Tai-tais, high maintenance professional women & office ladies. Tai-tais are the wives of business tycoons who have the highest spending capacity. It has been estimated that each one of them spends around a million USD on shopping annually. Women professionals are either successful entrepreneurs or high level executives who are highly discerning and ardent lux lovers. They spend around 15000-50000 USD annually. At the lower spectrum of luxury spenders lie office ladies who generally are secretaries or junior executive & whose per head spend ranges from 500-2000 USD annually, spend a huge portion of their salaries at a single go. These women mostly buy luxury bags and shoes, items which are evidently visible. This generation of characterized by no saving habits which is quite similar to the single parasites of Japan.
How a state of this size could support so much of luxury retail, has been a subject of wonder. The major reason behind high sales in Hong Kong is low import duties ranging from 12-30 percent, no sales taxes and negligible corporate income tax around 16 percent which bring down the prices of these brands. Another important factor is tourism which pulls in a lot of foreign shoppers majorly from China and Japan. Also the stores and shopping centres are so strategically located here that you cannot avoid shopping. These brands go for prime locations in the city with a huge selection opportunity. Hong Kong has a mixed culture due to long colonial rule of the British which differentiates it from rest of the China. This culture well describes the shopping madness in Hong Kong.
About the Author
The author is Assistant Professor in FMS Department, National Institute of Fashion Technology (NIFT), Gandhinagar.