Jewellers scale down to adapt as Hong Kong loses its tourist lustre
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After a decade of aggressive store expansion, Hong Kong’s jewellery retailers have been hardest hit by the recent downturn in tourism, with half their revenue coming from mainland shoppers.
Jewellers have now been forced to a adopt variety of strategies to tackle the tougher market, ranging from trying to lure local customers, cutting store sizes and expanding business overseas.
TSL, one of Hong Kong’s largest jewellery chains, is scaling back its presence in tourist districts while setting up more small shops in local malls.
Estella Ng Yi-kum, deputy chairman and chief strategy officer at TSL, said the rent for one store in a prime area could pay for at least two stores of the same size in a residential area.
“Moving into residential areas enables us to provide better customer service,” said Ng, adding that growth in local stores is “much more stable”.
After the closure of its flagship Causeway Bay store earlier this year, TSL has opened three smaller stores in Temple Mall North in Wong Tai Sin, Plaza Hollywood at Diamond Hill and Olympian City in Kowloon.
Luk Fook, the city’s second largest jeweller, is maintaining its presence in prime retail areas, in the hope that the mainland tourists will return, while cutting the size of some stores or relocating them to secondary locations.
“Moving into residential areas enables us to provide better customer service,”
Earlier this year, Luk Fook closed a store on Nathan Road, which had cost HK$2 million a month to rent. Meanwhile it opened a smaller store on the same street with the rent as low as HK$400,000.
“The turnovers were almost the same,” said Luk Fook chairman and chief executive William Wong Wai-sheung, adding the smaller store was enough to cater for the shrinking number of mainland tourists.
Following the logic that mainlanders have to spend their money somewhere, Chow Tai Fook, the city’s largest jeweller, has moved into both the mainland and South Korea, another emerging tourist mecca.
It recently opened a new store in Qianhai free-trade zone in Shenzhen, offering competitive prices just slightly higher than Hong Kong. The jeweller’s mainland business contributed 56 per cent of its total revenue in the six months to September 30 this year, according to company figures.
International jewellery brands seem to be adopting the opposite strategy, switching their existing stores to prime locations, according to a retail leasing expert.
Joe Lin, executive director of retail services at leasing firm CBRE, said many international brands had rented stores with either better quality in terms of customer traffic and visibility, or lower rents in Causeway Bay.
“This is a great timing” said Lin, adding that more prime store locations had become available amid the retail downturn.
This article appeared in the South China Morning Post print edition as Jewellers forced to adapt as city loses its tourist lustre
Questions & Answers
Q.What is driving the change in strategy for Hong Kong's jewellery retailers?
What is driving the change in strategy for Hong Kong's jewellery retailers?
A downturn in tourism, particularly from mainland shoppers who previously contributed half of their revenue, has forced jewellers to adopt new strategies. They are now trying to attract local customers, cut store sizes, or expand overseas.
Q.How does TSL benefit from opening smaller shops in residential areas?
How does TSL benefit from opening smaller shops in residential areas?
TSL states that moving into residential areas allows them to offer better customer service. The rent for a single prime-area store can cover at least two same-sized stores in a residential area, and growth in these local stores is more stable.
Q.What strategy is Chow Tai Fook employing to counteract the decline in Hong Kong tourism?
What strategy is Chow Tai Fook employing to counteract the decline in Hong Kong tourism?
Chow Tai Fook has expanded its business into mainland China and South Korea, which is an emerging tourist destination. Its mainland business contributed 56% of its total revenue in the six months to September 30.
Q.Are all jewellers adopting the same strategy as local Hong Kong chains?
Are all jewellers adopting the same strategy as local Hong Kong chains?
No, international jewellery brands are reportedly pursuing an opposite strategy. They are switching their existing stores to prime locations, seeking better customer traffic, visibility, or lower rents in areas like Causeway Bay.
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