Why red-packet retailers are popping up in prime locations
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During the Lunar New Year period, most Hongkongers would need some red envelopes to put in lucky money for kids, for young unmarried colleagues or for doormen.
The envelopes are often obtained free as they are given away by banks, corporate houses or business counterparties. Hence, not many people would actually want to, or need to, pay for the items.
So, it’s a bit surprising that in prime districts such as Tsim Sha Tsui, Causeway Bay and Mongkok, we have seen some new red packet outlets opened by a specialist retailer, Chinese Red Packet.
The Tsim Sha Tsui outlet is located on premises where a Chow Tai Fook store once stood. The jewelry shop, which used to pay HK$2.6 million a month as rent, decided not to extend the lease due to a general slowdown in Hong Kong’s luxury retail segment.
The Hong Kong Economic Journal talked to some real-estate agents to find out how the red packet vendor is able to afford that premium retail space.
The truth is that there have been rising vacancies in street-level shops due to the lackluster sales. Landlords are more willing to accept short leases while waiting for long-term tenants.
While some spots have been successfully leased out to long-term tenants, there is still a time lag before the new lease starts. Owners don’t mind offering the shops for a month or two on the cheap to at least get some income during the period.
Still, we are talking something like HK$200,000 monthly rental. Are sales enough to cover that?
Locals who want their red packets printed with unique or funny blessing words don’t mind forking out a small sum. There are also locals who want their surname on the envelopes to differentiate the gift packets from those of others.
Meanwhile, the items are also said to be very popular with visitors who buy them as souvenirs, as the products come in all kinds of designs and colors including gold, pink, and purple.
Going for about HK$100 a small pack of 50, the pricing is actually quite high and the profit margin pretty fat.
Questions & Answers
Q.How can a red packet retailer afford prime retail space when luxury brands are struggling?
How can a red packet retailer afford prime retail space when luxury brands are struggling?
Landlords are increasingly willing to accept short-term leases due to rising vacancies in street-level shops. This allows them to generate some income cheaply while awaiting long-term tenants for the space.
Q.What makes people want to pay for red packets when they can get them for free?
What makes people want to pay for red packets when they can get them for free?
Locals are willing to pay for unique or funny blessing words, or to have their surname printed on the envelopes. Visitors also buy them as souvenirs, attracted by the diverse designs and colours available.
Q.What is the approximate monthly rent for the red packet shops in prime locations?
What is the approximate monthly rent for the red packet shops in prime locations?
The monthly rental for these prime locations, even on short leases, is around HK$200,000. This is considerably less than the HK$2.6 million previously paid by a jewellery shop at one location.
Q.Are these red packet retailers selling a high-priced product with good profit margins?
Are these red packet retailers selling a high-priced product with good profit margins?
Yes, a small pack of 50 red packets sells for about HK$100. This pricing is considered quite high, suggesting that the profit margin for the specialist retailer is substantial.
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