Wednesday, August 7, 2013

Of Ghost Stores and Luxury To Go

Looking for a pepperoni pizza and a black Epi leather pochette bag to go.

There is a discernible echo inside the nearly empty halls of luxury stores around Hong Kong during these summer months. The sales people look bored - Candy Crush notwithstanding - and don’t appear to be scurrying around as often as they recently did in service to visiting mainland shoppers, gathering up racks of leather goodies or sparkling jewelry.  From these outward appearances, the double whammy of China’s economic slowdown and Xi Jinping’s anti-graft crackdown are definitely taking a bite out of luxury sales in Hong Kong and on the mainland. As further evidence of the slowdown, this article in the Asia Sentinel ponders why Louis Vuitton failed to complete a lease on a sizeable space (at rent of US$2.6 million per month) in Hong Kong’s Time Square. Perhaps LVMH is finally balking at the absurdly high rents being demanded by Hong Kong landlords for prime retail space. Perhaps the Europeans are feeling the pinch of Chinese tastes moving away from logo-emblazed handbags, wallets and luggage towards more discreet offerings.
However, before shedding alligator-skinned tears for the purveyors of luxury goods facing hard times, consider that there may be other consumption trends afoot that are keeping the good times rolling, only more quietly. According to a recent report in the SCMP newspaper, Chinese VIPs have been able to continue to indulge their taste for la dolce vita through telephone orders to shop hotlines, away from the prying eyes of the media. Want that pretty dyed pink ostrich skin Birkin bag?  Simply check out the Hermes website, pick up the phone to the Tsim Sha Tsui shop, and voila, in a few hours, it’s in your hotel room! What could be more convenient? Therefore, though the foot traffic inside the stores is decidedly lighter, it’s a safe bet that the freight elevators inside hotels and office buildings are still seeing an active flow of boxes wrapped with pretty ribbons. With a brisk trade in luxury-to-go, why bother with annoyingly high rents, costly overhead and wagging fingers from the public?

A basic law of physics states that, for every action, there is an equal and opposite reaction. Similarly in China, where there are government measures, there are always available countermeasures. Or in plain English, where there’s a will, there’s a way. That's especially true when the margins are fat and the goods are so easy on the eye.

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