Mainland Chinese Shoppers Changing Hong Kong Retail Landscape

Preference Of Wealthy Mainland Tourists For Upscale Malls, Luxury Outlets Hits Department Stores Hard

Chinese luxury shoppers typically prefer upscale shopping malls to all-in-one department stores, as Shanghai's Plaza 66 attests (Image via Flickr)

Chinese luxury shoppers typically prefer upscale shopping malls to all-in-one department stores, as Shanghai's Plaza 66 attests (Image via Flickr)

Last week, Jing Daily translated an article about Chinese tourists outspending Japanese 2-to-1 at a number of famous South Korean department stores. According to that article, visitors from mainland China now account for more sales than ever at some of Seoul’s most fashionable and expensive stores, and it’s not unknown for one-day tourists to drop hundreds of thousands of dollars in one shopping spree. As we’ve noted before, Chinese tourists taking cross-border shopping trips is far from unique to Korea, however, and two of the biggest beneficiaries of the outbound shopping boom have been some of the mainland’s closest neighbors — the Chinese special administrative regions of Macau and Hong Kong.

Macau, which is known more for its casinos than its malls, is relatively new to the Chinese shopping-tourist itinerary, but over the past few years the city has seen a surprising amount of construction, both of independent luxury boutiques and malls — all of which are built with mainland tourists in mind. Hong Kong, however, has been something of a playground for the mainland’s wealthy elite for quite some time, as the city’s cosmopolitan luxury infrastructure was well in place by the time China’s economy began its dramatic growth in the early 1990s. Over the past 20 years, the trickle of wealthy mainlanders escaping high import taxes by hopping across the border for duty-free shopping sprees in Hong Kong has become a deluge — much to the enjoyment of Hong Kong retailers and luxury brands from around the world.

As a recent South China Morning Post article points out, an interesting byproduct of more mainland shoppers throwing their weight around in Hong Kong has been the gradual decline of traditional Hong Kong department stores in favor of luxury outlets and smaller upscale malls. Although this may not sound like much of a story in itself, it does show how Chinese tourists are no longer following global trends in some parts of the world — they’re setting them. From the article (via Guanyu):

Traditional department stores, which once boomed in the city, have faced major challenges following the rise of shopping malls and people’s changed shopping habits.

The hordes of mainland tourists that descend on the city every week are particularly fond of the famous brand outlets, located at malls such as Times Square and Pacific Place.

It was not always so. A weekend trip to a department store such as Sincere or Wing On was a must for most Hong Kong families up until the 1990s. Children could shop for toys, fathers for ties and shirts while mothers could get everything from handbags to kitchen utensils.

Local department stores first faced serious competition in the 1980s from Japanese rivals. Then a more ominous trend emerged, with the rise of shopping malls. Over the past two decades the number of local department stores has dropped to only a few survivors. Malls have all the “under one roof” convenience of a department store with the added attraction of name-brand outlets. Beijing resident You Xiaojia, a regular shopper in Hong Kong, is familiar with most major retail areas in the city. She and her husband visit at least once a year to purchase clothes, accessaries and cosmetics.

But like most mainland tourists, her itinerary is usually filled with visits to shopping malls. Traditional department stores are seldom on the “to do” list.

You’s attitude is typical of mainland shoppers, who have been the main driver of the city’s retail industry over recent years. That means department stores are benefiting less than shopping malls from the customer inflow across the border.

From 2004 to 2008, the total floor space of the city’s shopping malls increased by 1.7 million square feet on average every year, with new mega shopping centres rising one after another.

It is interesting to see how mainland trends — e.g., the construction of and preference for shopping malls rather than “one-stop-shop” department stores — is having a spillover effect in Hong Kong and, ostensibly, Macau. Although Macau never had as many department stores to begin with as Hong Kong, a quick drive around Macau indicates how much influence mainland tourists and businesspeople are having on the city’s construction and commerce going forward.

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