Hong Kong presents itself as the gateway to China

Fashion retailers are experiencing hard times in the shopping paradise of Hong Kong. Due to the city’s popularity as a business location, rental prices have soared over the last three years and retail space has become practically unaffordable

for local entrepreneurs. Bottega Veneta has seven retail outlets in the city, Chanel and Prada both have eight and Gucci has ten. Yet Hong Kong isn’t only popular with the luxury brands, the more affordable sector has also discovered the city. H&M has nine outlets and Zara eight. Gap will soon be opening their first shop, Abercrombie & Fitch is on its way and Forever 21 will arrive this autumn. In research carried out by Cushman & Wakefield on the world’s most expensive shopping locations, Causeway Bay in Hong Kong came second in both 2009 and 2010, right behind Fifth Avenue in New York. Abercrombie & Fitch will be paying HK$ 7 million per month for their 2000 m² retail location.

“The problem of high rental prices is currently the biggest challenge for fashion professionals in Hong Kong,” according to Vincent Fang. Fang experiences the pressure personally. He owns the Toppy Group with the three women’s fashion chains: Episode, Jessica and Weekend Workshop and has had to close half of his Hong Kong shops because of the increasing rental prices. “We are moving our shops to the second or third floor because the ground floor has become too expensive.” Fang still has a chain of fifteen shops in Hong Kong but on the Chinese mainland his retail imperium owns about four hundred shops. According to Fang, one of the reasons that Hong Kong is such a popular location is that the city is seen as the gateway to the rest of China. “If you want to conquer China, you start in Hong Kong.”

The position of Hong Kong as the gateway to China is one of the most important usps for the Hong Kong Trade Development Council (HKTDC)’s Hong Kong Fashion Week and Trade Fair held from 4 - 7 July and of which Fang is the Director. “Anything you need to know about doing business in China can be learnt here.” During the eighteenth edition at the Hong Kong Convention Centre the number of exhibitors rose to 1313, compared with 1294 last year. According to the organisation’s figures the total number of visitors was 23,614; with just over half that number coming from Hong Kong itself. There were also more than 70 buying missions organised for more than 2000 buyers from outside the city. This is a great result for a trade fair that is facing increasing competition from new sourcing fairs on the Chinese mainland. New trade fairs that, as reported by many exhibitors, can rent their stands for a much lower price.

The arrival of mass production in countries such as Bangladesh, Cambodia and Vietnam is felt here as well. Yet after two years of negative growth the export of clothes from Hong Kong is starting to recover. Figures from the HKTDC show that exports rose by 8 per cent in the first four months of 2011. Although the greatest growth was recorded in exports to the Chinese mainland (+56 per cent), the export of clothes to the United States and the European Union have also risen. Together they make up about two-thirds of total clothing exports from Hong Kong and have a value of HK$ 35.1 billion, equivalent to GBP 2.7 billion. Large quantities of clothes are exported to the European countries of France, Germany and Italy (+11, +10 and +7 per cent). However, exports to the United Kingdom and The Netherlands have, in comparison, decreased by 9 and 4 per cent respectively.

Despite the fact that clothing manufacturers in China and Hong Kong produce increasingly more goods for their own market (where a growing middle class population must be provided with jeans and T-shirts), the foreign customers (the US, the EU and also Japan) form an important source of income. This applies to the producers, suppliers and also to the retailers that are forced to pay high shop rental prices. Or as Vincent Fang formulates, in Hong Kong’s shopping paradise the motto is: ‘to keep shopping’, in all sectors.

From our correspondent