Hong Kong set to regain global luxury shopping centre status: report
The city has eased restrictions for international tourists.
The expected return of international tourism as inbound restrictions ease is expected to boost the luxury retail sector in Hong Kong as the city is set to regain its status as a key global centre for luxury shopping before the pandemic, Fitch Solutions said.
Hong Kong's retail market has traditionally been supported by high household incomes and spending, with spending by tourists, particularly from Mainland China, playing a large role in the luxury end of the retail market, the report noted.
“The luxury market is particularly important in Hong Kong, with a large number of global luxury retailers present in the market to take advantage of Hong Kong's status as a global financial centre as well as high-spending Mainland Chinese and other international tourists,” Fitch said.
Over the medium term, clothing and footwear spending is projected to grow by an annual average of 6.7% to $33.5b (HK$260.3b). Compared to overall household spending, clothing and footwear spending is expected to outperform total household spending growth, indicating a refocus on fashion spending in Hong Kong over the medium term, Fitch said.
“Whilst mainstream Mainland Chinese tourism to the special administrative region has not yet fully recovered, Hong Kong has eased restrictions for incoming international tourists and will likely join the majority of Asian markets in continuing the easing of restrictions,” the report stated.
In the short term, Fitch noted that clothing and footwear sales in Hong Kong have been one of the hardest hit consumer categories during the pandemic years, as people stay home and social interactions are greatly reduced.
Many consumers either reprioritised spending away from the category or moved down price points, decreasing their nominal spend for the same number of items, Fitch said.
“As a result, the category has been slow to recover in value terms. Over 2022, Hong Kong has embarked on a cautious easing of domestic social restrictions and as of September 2022, has begun relaxing requirements on international arrivals,” the report stated.
Still, the return to work and greater levels of socialising is expected to drive short-term growth in clothing and footwear spending in Hong Kong, and to remain sustained over the medium term, covering until 2026.
“Players are already capitalising on the return to normalcy and economic activity,” Fitch said. “Singapore-based Love Bonito, a female office-wear and lifestyle fashion brand, expanded their presence in the city after the company opened their Hong Kong flagship store in July 2022 after entering the market in 2019 with a pop-up store and a localised online store in 2021.”