Why luxury sector woes could be a blessing in disguise

Hong Kong’s retail sector can bounce back from the current sluggish phase, as it did in the past in the wake of the 2003 SARS crisis and the 2008 global financial meltdown, an industry chief says.

“Hong Kong retailers are smart; it might take time but the sector will definitely recover,” says Thomson Cheng, the new chairman of the Hong Kong Retail Management Association.

“Tomorrow will be a better day,” he told the Hong Kong Economic Journal.

To counter headwinds like a stronger local currency and fewer mainland visitors, Cheng urges retailers to upgrade their services and provide more unique products.

Hong Kong should not focus too much on Chinese tourists, but should try to attract people from across the world, he said.

As an executive director of Lane Crawford Joyce Group, Cheng has been involved in luxury retailing for years.

The industry veteran expects the luxury segment to continue to be the worst performer in 2016.

“I don’t see much of a rebound next year.”

But one good thing about the shrinkage of luxury sales is that it will unlock retail space to other shops. During the heyday, high-end stores had crowded out the smaller brands and retailers of other products.

Many major luxury brands have already announced downsizing plans in Hong Kong amid the current downturn in sales. Some firms are looking to cut their store number by as much as a fifth.

Shopping malls should consider diversifying and bringing in more retailers that offer goods and services related to everyday living, Cheng said.

The retail ecosystem will be healthier if there is wider variety and more brand diversity, rather than the present situation in which there are too many jewelry shops, cosmetics retailers and drug stores chasing mainland tourists, he said.