HONG KONG: Luxury retailers in Asia-Pacific are having to broaden their focus in order to address a slowdown across the region, including the introduction of more affordable fashions and moves into the children's wear and food and beverage sectors.
In a new report, The Future of Luxury Retail in Asia Pacific: New Demand Drivers and Shifting Occupier Requirements, CBRE, the commercial real estate business, observed that most of the major luxury retailers are now well established in the Asia Pacific region, especially in mainland China and Hong Kong where penetration rates stand at 89% and 81% respectively.
But as shopping habits change in those two markets, thanks to a crackdown on corruption and a slowing economy, retailers are rethinking their approach.
"The high growth period for luxury retailers in the region is gradually coming to an end," said Dr Henry Chin, head of research, CBRE Asia Pacific, in remarks reported by Inside Retail Asia.
"Over-saturation, surging operational costs and weaker retail sales … have prompted retailers to consolidate their existing store networks and slow their rate of entry into new markets focusing on operational efficiency," he added.
The report identified three trends it said would help offset these negative factors and provide "a solid new stimulus for demand" in the years ahead.
Among these is "affordable luxury", as consumers seek high quality branded goods at a lower price tag than those offered by the top tier. In some cases, overexposure of top-tier brands means consumers are looking for differentiation as much as lower prices.
With 20% of the region's population below the age of 14, CBRE also suggested there is an enormous opportunity in luxury children's wear, with the potential for subsequent expansion of in-store offerings to include toys, bookstores and playrooms.
The third area where it has seen luxury brands expanding is into the food and beverage sector as they shift from a purely fashion emphasis towards becoming lifestyle brands and offering a space in which their customers can relax and socialise as well as shop.
Gucci, for example, has recently opened 1921 Gucci, a fine dining restaurant, in Shanghai's iAPM luxury mall, while in Seoul, Christian Dior offers Cafe Dior by Pierre Hermé on the top floor of its flagship store.
Data sourced from Inside Retail Asia; additional content by Warc staff