Warc Blog

Mid-tier brands expand in Hong Kong

16 July 2014
HONG KONG: Hong Kong remains an attractive destination for international retailers but fewer luxury brands are entering the market while more mid-tier brands are expanding there.

According to property consultants JLL, 40 new brands, including designer labels such as Philipp Plein, opened stores there in 2013 and Tom Gaffney, head of retail at JLL Hong Kong, said that "Hong Kong is miles ahead of rival Asian cities in housing international brands".

But, he added, "we have noticed fewer brands in the luxury sector expanding in the first half of the year". And of the 40 new brands opening stores last year "over 90% are mid-tier brands". By this he meant names such as J. Crew, Intimissimi, Topshop and Superga, from the US, Italy and the UK.

In addition, fast-fashion brands and cosmetics retailers from South Korea and Japan, such as Esprit and Sulwhasoo, were expanding their footprint in the city and Gaffney, writing in the South China Morning Post, expected these mid-tier brands to benefit from a growing Asian middle class opting for affordable luxury.

Despite Hong Kong's sky-high rents, international brands continue to see Hong Kong as a stepping stone to the huge Chinese mainland market. Conversely, mainland brands like to test their plans in Hong Kong before pushing for global expansion.

Gaffney noted that there were other factors that made the city appealing, including a low-tax environment that made products more affordable, a dynamic market offering a wide range of choices and an efficient travel infrastructure.

He expected, however, that fewer new brands would make the journey there, not least as the government proposed to reduce the number of mainland tourists – who account for around one third of retail sales – by as much as 20%, per cent. Further, retail sales were slowing, down 0.2% in the first five months of 2014.

He suggested that the slowdown would help mid-tier and mass-market brands in their negotiations over store rents.

Data sourced from South China Morning Post; additional content by Warc staff

 
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