When a gold retailer starts selling sunglasses
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Warmer than expected Christmas weather appears to be providing little comfort for Hong Kong’s retail sector this year. Business has been cold at many outlets despite a projected rebound in mainland visitor arrivals.
Otherwise, what can explain a gold shop branching out into sunglass sales and news that the city’s biggest karaoke operator is scaling down its operation?
Let’s talk about the gold retail chain first.
I’m referring to Luk Fook Jewellery, which has just opened its first eyewear store — “Vision Gallery”.
The new venture comes after the company announced last month a 31.5 percent slide in same-store sales for the six months ended September compared to the same period a year ago.
The eyewear store has been put up in a prime location, next to an H&M outlet, on Dundas Street in Mongkok.
Luk Fook is said to have signed a two-year lease for the 600-square-foot retail space, offering a monthly rental of HK$128,000.
Though the rent is just half what the previous tenant, bankrupt home appliance chain DSC, was paying earlier, there is still this question: why an eyewear shop, instead of another gold store?
Well, the answer lies in economics.
Chairman Wong Wai-sheung told Ming Pao that a 1,000-square-foot gold shop, in terms of costs, would be equivalent to opening 10 eyewear stores.
Guess what? Luk Fook, which currently has 47 gold shops in Hong Kong, has earmarked HK$20 million to open 10 eyewear stores next year, with a focus on the middle class.
Last year, the company had 50 gold shops in the city.
To boost Christmas sales at the new eyewear outlet, Luk Fook is giving away a pair of pearl earrings to the customers.
We are not sure if this is a nice cross-selling idea but would reckon this is a defensive move.
Luk Fook as well as its competitors such as Chow Tai Fook and Tse Sui Luen have seen their same-store sales fall steeply this year, with 20-30 percent slide in many cases.
“I’m referring to Luk Fook Jewellery, which has just opened its first eyewear store — “Vision Gallery”.”
In comparison, an eyewear retailer such as Stelux Holdings has seen its sales dip just 5 percent.
During its interim results, Luk Fook said it will strive to broaden its income sources, enhance the operational efficiency and reduce costs in order to minimize the impact of the business downturn.
The foray into eyewear retail is part of that strategy.
Elsewhere in the city, Karaoke operator Neway has also come up with a new way to survive.
Rather than open a new venture, Neway is leasing the 4,000 square-feet lobby and first floor at its Causeway Bay flagship store CEO Neway, according to Apple Daily.
By sub-leasing 30 percent of the original floor area, Neway is trying to shore up revenues which have been hit by a decline in night-time singing parties at its karaoke outlets.
The plan will also help the company save some HK$1.8 million in monthly rental.
The sub-leasing of Causeway Bay shop space comes after the group shut down an 18,000-square-foot Mongkok facility last year.
As much as we miss the grand lobby of CEO Neway and the good old days of group singing, we cannot help but admit that Karaoke outlets are now a bit out of fashion after they dominated the social scene for about twenty years.
This year, one of the best-selling items at the Golden Computer Arcade in Sham Shui Po is a microphone with karaoke function that sells at no more than HK$500.
The made-in-China product, which connects through bluetooth with iPad and the home stereo system, has become an immediate hit and is now a must-have during family gatherings.
If you can get the same kick at home, why bother spending money on a karaoke shop? This seems to be the view of a growing number of people.
Given this reality, Neway may need to find something else to sell other than songs.
Questions & Answers
Q.What is the main reason Luk Fook Jewellery has started selling eyewear?
What is the main reason Luk Fook Jewellery has started selling eyewear?
Luk Fook's same-store sales fell significantly, and its chairman stated that the cost of opening one gold shop is equivalent to opening 10 eyewear stores. This new venture aims to broaden income sources and reduce costs.
Q.How much does Luk Fook Jewellery pay for the rent of its new eyewear store?
How much does Luk Fook Jewellery pay for the rent of its new eyewear store?
Luk Fook pays a monthly rental of HK$128,000 for the 600-square-foot eyewear store. This rent is half of what the previous tenant, DSC, was paying.
Q.Why is Neway, the karaoke operator, sub-leasing space at its Causeway Bay store?
Why is Neway, the karaoke operator, sub-leasing space at its Causeway Bay store?
Neway is sub-leasing 30 percent of its flagship store's original floor area to shore up revenues and save approximately HK$1.8 million in monthly rental. This move follows a decline in night-time singing parties.
Q.What evidence suggests that karaoke outlets are losing popularity?
What evidence suggests that karaoke outlets are losing popularity?
Karaoke outlets are considered somewhat out of fashion, with a popular item being a HK$500 Bluetooth microphone for home use. This indicates more people are choosing to sing at home.
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