The art of luxury retail: How Hong Kong is reclaiming its title as a VIP hotspot
In November, Louis Vuitton transformed Hong Kong’s Avenue of Stars into a dazzling runway. Pharrell Williams brought his vision to life with the Men’s Pre-Fall 2024 Collection, hinting at Hong Kong’s resurgence as a beacon of art and culture. Earlier this year, Chanel announced its grand return, planning to unveil its Cruise 2024/25 Collection in Hong Kong, five years after its last show in the city.
Hong Kong, despite the ongoing economic headwinds, has seen increasing investment in the luxury sector with brands expanding their footprint in the market.
Rising investment
In June, a lineup of luxury labels, including Cartier, Chanel, Hermes, Prada and Van Cleef & Arpels, signed on to a US$1 billion luxury development planned by listed property developer Hongkong Land scheduled over the next three years.
Luxury house Prada has also been reported to have leased an 8000sqft space inside K11 Musea for its flagship store, four years after scaling down its presence in the market, including the closure of its Causeway Bay flagship store in 2020.
“Prada’s decision to open a flagship store in Hong Kong after years of downsizing reflects renewed confidence in the market,” said Matthias Weiskopf, luxury retail lecturer at SMU Academy. He attributed the move to improved leasing conditions and an anticipated recovery in luxury spending.
Alex Anton, co-founder and chief marketing officer at 2-Times, an invite-only luxury online retailer and event-based private shopping service, said the market is shaping up to be “a perfect storm for those luxury brands who have the means to be more bullish this year”.
“High-traffic locations once thought unattainable are now within reach, thanks to more favourable leasing conditions, evidenced by recent flagship openings and refurbishments counting Louis Vuitton, Cartier, Hermès, and Chanel,” he said.
Why are luxury brands investing more?
Weiskopf said that in the long term, “brands are optimistic about a market rebound and are strategically positioning themselves to benefit from future economic improvements”.
Meanwhile, Anton added that “it’s a fact that Hong Kong boasts the world’s highest concentration of high-net-worth individuals relative to its population.”.
Hongkong Land said its VIC (very important customer) group has continued to spend more, with an average of HK$1 million (US$128,080) each last year. VICs contributed around 80 per cent of the company’s luxury retail sales in the region.
Looking at the ongoing recovery and stabilisation of the retail sector on a macro level, Anton noted that the announcement of the Hong Kong Government’s two-year extension of its low-interest loans program for SMEs is providing additional cash flow support for daily operations.
According to the Mainland China and Hong Kong Luxury Market report by PwC, the Hong Kong personal luxury market’s compound annual growth rate (CAGR) is estimated to reach 4.5 per cent from 2023 to 2030, reaching HK$125.8 billion by 2030.
Attract UHNWIs in the art space
Last week, the auction house Sotheby’s opened its first retail location, dubbed Maison, in Hong Kong. Designed by Rotterdam-based architecture studio MVRDV, the two-storey flagship at Landmark Chater boasts 24,000sqft and is home to a retail concept store offering an array of art, luxury and collectibles.
“The opening of Sotheby’s Maison is a strategic move to meet Asia’s rising demand for luxury art and collectibles. It leverages Hong Kong’s status as a global luxury hub,” Weiskop said , adding the location will attract various Asian and Mainland Chinese UHNWIs.
“Some are knowledgeable collectors who will explore the retail side, while others will begin with luxury shopping and eventually ‘upgrade’ to participating in auctions and collecting art and other valuables.”
Meanwhile, Anton said Sotheby’s new location is an “excellent addition for Landmark in Central”, particularly given its carefully considered floorplan.
“Larger upscale destination stores like Sotheby’s Hong Kong are being utilised to heighten curiosity and imagination by showcasing unique pieces to prospective collectors who otherwise may feel uninspired by shopping solely from luxury fashion and beauty retailers, who have enveloped the city for decades prior,” he said.
Before Sotheby’s Maison, the Swiss mega-gallery Hauser & Wirth opened in Hong Kong earlier this year, further solidifying the city as a global art hub, with potential knock-on effects for other luxury players that stand to benefit from the arrival of more wealthy art buyers.
Anton said high-profile art fairs and events like Art Basel Hong Kong or even smaller-scale incentive schemes like Hong Kong International Airport’s Luxury Concierge service, have helped reinvigorate the post-pandemic standing of Hong Kong as a global luxury hub, and swing the consumerism pendulum back in its favour.
Adaptation
According to Weiskopf, luxury retailers in Hong Kong are adapting by enhancing in-store experiences and integrating digital innovations. They are advancing personalised shopping experiences, VIP services, exclusive events, and seamless omnichannel retail.
Meanwhile, Anton said that online-first players like 2-Times have capitalised by hosting more intricate private events for their UHNWIs, where they can (almost) mirror the e-commerce experience, which services individual clients based on their respective luxury brands and artist preferences.
“In these highly customised settings, our multilingual private client managers focus on consultative selling and building longer-term relationships with each member, rather than adopting traditional sales methods. Referrals for private family offices, particularly in China and Hong Kong, are also viewed favourably and incentivised by our services team,” he said.
Challenges remain
“Hong Kong’s luxury market is evidence of the city’s dynamism, however like China, the sector is still in recovery mode, and therefore brands and retailers alike need to consider a few key challenges,” Anton stated.
“These include currency fluctuations causing leakage of domestic consumerism, changing habits of shopping tourists preferencing arts and cultural experiences, community wellness activities, and elevated dining. The growth of online continues to pull at physical touchpoints if not harmonised adequately. And, rents eventually return to peak or higher levels, heightening the need for specialty luxury stores to curate both their product and service offerings to find success.”
Weiskopf noted that while Hong Kong will remain a global luxury hub, competition has significantly increased over the last decade, and VICs are spoilt for choice.
“The biggest impacts on Hong Kong’s luxury sectors include geopolitical tensions, global and regional economic conditions, and changing consumer behaviours post-pandemic, especially due to Mainland China’s scrutiny of ostentatious spending,” he said.
Weiskopf emphasised the importance of attracting younger, wealthy demographics and the recovery of tourism, particularly from Mainland China.
“Regaining momentum among these different audiences is vital for Hong Kong’s status in the global luxury landscape. The strength of the local economy and government policies will significantly influence the market’s performance,” he said.
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