Hong Kong Shopping Sprees Mean Big Business for Retailers. Are American
firms missing out?

By Swee-keng Cheong

April 12, 2007

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*"* **We see Asia as a big territory and in a few years we**

believe it will play

**the part Europe does today for**

**company growth,"**

### Carlos Alberini

### President and Chief Operating Officer, Guess

While shopping in any shopping mall or shopping district in Hong Kong, I
can't help but ask, where are the American brands? Sure, there are a few
brands here and there, but they are overshadowed by the plethora of
Italian, French, Japanese and other Asian and European brands.

Hong Kong is an important -- yet often overlooked -- market-entry point
for retail in Asia.

-   Hong Kong's tax-free status means shopping is cheaper here than in
    neighboring markets -- like mainland China or Japan

-   Hong Kong was visited by 21 million tourists in 2006, including 13.5
    million from mainland China, who shop, shop, shop!!!

-   Hong Kong's vibrant music, movie, television and print media
    continue to influence fashion trends throughout Asia

-   Hong Kong's domestic population of 7 million has one of the highest
    average disposable incomes in the region

Hong Kong's retail market is vibrant. Retail sales valued at US\$28
billion at the end of 2006 were up 7.3%, boosted by domestic
expenditures and tourist spending. A Tax Free World Association (TFWA)
survey conducted in 2005 found Hong Kong, followed by Macau, to be the
two most popular destinations for Mainland Chinese outbound travelers.
The survey also revealed that "shopping is definitely considered to be a
'must-do' by most outbound Chinese travelers, especially when they
travel to Hong Kong." Fashion goods (purchased by 53% of the Chinese
travelers,) cosmetics (50%,) and confectionery (50%) were ranked among
the top 3 shopping purchases for the Chinese travelers in the survey.
The 13.5 million Mainland Chinese tourists that visited Hong Kong in
2006 spent an average of US\$584 per person.

![](media/image2.wmf)

Source: 2005 TFWA-ACNielsen Chinese Traveller Study

To tap the lucrative Mainland Chinese consumer spending market, several
of the world's leading luxury brands such as Louis Vuitton, Prada,
Bvlgari, and Giorgio Armani have opened flagship stores in Hong Kong.
Miuccia Prada, owner of the Prada selected Hong Kong for the location of
its second largest store in Asia (after Japan) as Hong Kong
"increasingly represents a launch pad into the Chinese market; it
creates the trends and acts as a showcase for this market." A Hong Kong
presence paves the way for expansion into China.

H&M's recent Hong Kong store opening should serve as a wake-up call for
American retailers. With queues that stretched for blocks down Hong Kong
streets, shoppers waited for hours to enter H&M on their opening day.
The

buzz around this high profile opening was carefully orchestrated with
city-wide marketing blitz featuring advertisements on almost every
available space in the city .

Stefan Persson, H & M's Chairman said at the store opening that they had
kept Madonna's line of clothing especially for Hong Kong as "...this is
an important moment for us because Hong Kong is such a fashionable
city." Nils Vinge, Head of Investor Relations at H&M reiterated that
"Hong Kong is fashion-oriented and the people are big fashion
spenders..." H & M chose Hong Kong as the first city to launch its Asia
stores.

# 

# Macau: The Next Retail Wave

Just 25 miles away from Hong Kong and an hour's ferry ride is Macau,
"Asia's Las Vegas." Las Vegas Sands Corp. is developing Cotai Strip in
Macau modeling it on the Las Vegas Strip. The Cotai Strip is anchored by
the 3,000-suite Venetian Macau Resort-Hotel and 7 other hotels (Conrad,
St. Regis, Shangri-La, Holiday Inn, Four Seasons, Regal, Renaissance,)
are under construction. Add to that, a 20,000-seat entertainment center,
a convention and exhibition center, and over a million sq. ft. of retail
space, and

the stage is set for some serious shopping. Macau visitor arrivals are
expected to increase from 16.67million in 2004 to 23.61million,
following the opening of the Venetian Macau and its convention and
exhibition center in July 2007. Macau is less than 5 hours away from
almost two-thirds of the world's population, and almost the whole of
Mainland China. Information on The Venetian Macau is available at
<http://www.venetianmacao.com/eng/gcs_main.html>

![](media/image3.jpeg){width="3.091666666666667in" height="3.25in"}

For companies who are targeting Chinese consumers, Hong Kong and Macau
present exciting and unique opportunities.

Formats for market entry include finding a local distributor /licensee,
setting up an office to run the stores (and leveraging Asia sourcing
offices) or franchising. The U.S. Commercial Service in Hong Kong can
help American companies identify possible partners/licensees, and
investors, and provide customized research information for all market
entry needs: information on

local tastes and spending patterns, logistics and supply chain support
services, retail real estate services, and marketing and advertising
strategies.

Check this website on our services
[www.buyusa.gov/hongkong/en/servicesforus.html](http://www.buyusa.gov/hongkong/en/servicesforus.html)
or **contact**

**Ms Swee-keng Cheong at**

**<swee-keng.Cheong@mail.doc.gov> for more information.**

#### Telephone: (852)2521-5233

**Picture** **showing the queues from the opening of the new *H&M* store
in Hong Kong on March 10, 2007.**
![](media/image5.jpeg){width="5.526388888888889in"
height="7.739583333333333in"}

***M by Madonna*: Madonna takes over Hong Kong**\
Advertisements on the opening of the new *H&M* store in Hong Kong and
the debut of the *M by Madonna* collection were placed in many subway
stations, bus stops, and streets.

![](media/image6.jpeg){width="3.125in" height="2.4631944444444445in"}

"In 10 years, Chinese luxury consumers will catch up with their
counterparts in Japan"

Goldman Sachs Report on Global Luxury Sales 2006

![](media/image13.wmf)

**"Hong Kong is a hub. If you succeed in Hong Kong, you are halfway to
success in the rest of the region***.***"**

Newman Tsang, General Manager

Mini Cooper Hong Kong

**"Hong Kong has always been a very strong and competitive market leader
in terms of style and influence, not just among the region but also
worldwide."**

Abigall Walters

Four Seasons Hotel public relations director

**"Macau is a sleeping market,...in terms of numbers of tourists, it has
not yet caught up with Hong Kong but has great potential"**

Michele Norsa

Chief Executive, Salvatore Ferragamo

"**Hong Kong is a profitable market and we are selling well, and so
there is no reason to wait"**

Masanobu Furuta's comments on Muji's plan to open 5 stores in Hong Kong
in the next few years.

Senior Managing Director

Ryohin Keikaku (Muji's owner)