Abstract

The article delves into the dynamics of the luxury market in Hong Kong, exploring its rapid growth and the factors contributing to its flourishing state. Additionally, it examines various consumer segments and their significant purchasing behaviors within this luxury landscape.

Hong Kong boasts a profound affinity for luxury, largely driven by the affluent Shanghai residents and Chinese immigrants. Shopping transcends mere necessity here and is deeply ingrained in the lifestyle, culminating in a market valued at over $3.5 billion. Fueled by its duty-free status, luxury goods in Hong Kong are notably more affordable compared to elsewhere in Asia, resulting in a concentrated presence of luxury brands. Notably, major luxury labels maintain a significant number of stores in Hong Kong, surpassing their store count in global fashion capitals like New York, Milan, Paris, and London.

The genesis of Hong Kong's luxury market can be traced back to the 1970s when the economy began to flourish. Initial luxury sales were attributed to nightclub hostesses, whose social status was gauged by the brands they flaunted, often returning purchased goods for refunds. The surge of wealth in the 1980s and 1990s sparked a revolution in the local luxury industry, transitioning Hong Kong into a conspicuous consumption stage. Additionally, the influx of Japanese tourists significantly bolstered the sales of luxury brands. Presently, a considerable number of Chinese shoppers prefer purchasing luxury goods in Hong Kong due to perceived cost-effectiveness, authenticity, diverse selections, and superior services, as highlighted in a Boston Consulting survey.

Franchising emerges as a pivotal characteristic of luxury retail in Hong Kong. While many luxury brands previously collaborated with local agents in the early 1990s, most major brands began directly managing their operations post-1997. However, certain brands, such as Kenzo and Givenchy, continue to be managed by local agents. Luxury retail initially found its foothold in five-star hotels, notably Mandarin Oriental and Peninsula Hotel, and later expanded to upscale mega-malls like Ocean Terminal and high-end shopping centers like Landmark.

"The Cult of the Luxury Brand" by Chaddha & Husband (2006, pp. 122-27) identifies three primary consumer groups in Hong Kong: Tai-tais, high-maintenance professional women, and office ladies. Tai-tais, the affluent wives of business magnates, boast the highest spending capacity, with an estimated annual expenditure of approximately a million USD each on shopping. Successful women professionals, either entrepreneurs or high-ranking executives, exhibit discerning tastes and strong affinity for luxury, spending between $15,000 to $50,000 annually. At the lower end of luxury spenders are office ladies, often secretaries or junior executives, who allocate a significant portion of their salaries, ranging from $500 to $2,000 annually, on conspicuous luxury items like bags and shoes. This demographic exhibits a trend of minimal savings, resembling Japan's "single parasites" generation.

How a state of this size could support so much of luxury retail, has been a subject of wonder. The major reason behind high sales in Hong Kong is low import duties ranging from 12-30 percent, no sales taxes and negligible corporate income tax around 16 percent which bring down the prices of these brands. Another important factor is tourism which pulls in a lot of foreign shoppers majorly from China and Japan. Also the stores and shopping centres are so strategically located here that you cannot avoid shopping. These brands go for prime locations in the city with a huge selection opportunity. Hong Kong has a mixed culture due to long colonial rule of the British which differentiates it from rest of the China. This culture well describes the shopping madness in Hong Kong.


About the Author


The author is Assistant Professor in FMS Department, National Institute of Fashion Technology (NIFT), Gandhinagar.