◼ BUSINESS Bloomberg Businessweek January 27, 202018
city’s retail landscape has developed far beyond
the needs of its 7.5 million residents. It counts
about the same number of Louis Vuitton outposts
as New York City does and three times as many
Gucci stores.
Long before the protests began last year, forces
had already been chipping away at Hong Kong’s
regionaldominance inshopping.Thegrowth
ofbusyairlinehubsinBeijing,Shanghai,and
Guangzhoumeansmanywell-heeledmainland
travelerscanflynonstoptocitiesaroundthe
world, bypassing HongKong. And thehuge
expansionof Chinesee-commerce platforms
suchasAlibaba,JD.com,andothershasprovided
newcompetition.
Meanwhile,Chinahasbeenencouragingluxury
brands to open stores on the mainland. The
Chinese government has cut mainland import
taxes, and retail prices have fallen as a result.onshopping;they’realsomorelikelytobuy
high-endgoods.Theymakeupalmost80%oftotal
annualvisitors to Hong Kong. In November, after
the protests became more violent, the drop in vis-
itors from the mainland was a record 58%, accord-
ing to the Hong Kong Tourism Board. That month,
retailsalesfellbya quarterfromtheprevious
year,withjewelryandwatchsalesplunging44%,
accordingtothecity’sstatistics department.
That sluggish performance might be here to
stay, economists and retail industry analysts warn.
China’s state media have emphasized incidents of
anti-Chinese violence and harassment during the
protests, amplifying fear and resentment among
mainlanders who’ve only gotten more national-
istic during the trade war with the U.S. “In the
eyes especially of mainland tourists, Hong Kong
as a destination has changed permanently,”
says Tommy Wu, senior economist with Oxford
EconomicsinHongKong.“Partofit ishowit’s
beenportrayedonthemainland—therehasbeen
newsofanti-mainlandvandalismandviolence.
Theimageis quitenegative.”
Anylong-termreductioninvisitorswillhavea
dramaticeconomicfallout.TheHongKongRetail
ManagementAssociationestimatesthatthousands
ofHongKongretailers,bigandsmall,couldshut
downwithinthefirstsixmonthsof2020.Thecity,
theworld’sbiggestmarketforSwisswatchesfor
thepastdecade,is expectedtolosethatdistinc-
tiontotheU.S.andthemainland,accordingto
Jean-MarcPontroué,chiefexecutiveofficerof
luxewatchbrandOfficinePanerai,a unitofSwiss
luxury conglomerate Richemont SA.
Prada will close a store in the Causeway Bay
shopping district, one of seven Hong Kong loca-
tions, after the final shopping push of Lunar New
Year. Louis Vuitton will also shutter a store nearby,
leaving it with seven in the city. Chow Tai Fook
plans to close about 15 of its 91 stores in Hong
Kong, and cosmetics chain Sa Sa is tentatively
planning to close about 20% of its locations there
over the next 18 months. “Retailers have accepted
the fact that there are fewer tourists,” says Annie
Tse, chairwoman of the retail management trade
group. “In the past, Hong Kong’s retail market
expanded based on a high level of visitors. Now
everyone is consciously considering their scale for
the future.”
Two decades ago, Hong Kong merchants
were most concerned about how fast they could
expand. In 2003, China began issuing individual
tourist visas for travel to Hong Kong, kicking off
the retail boom. To keep pace with the voracious
appetites of some 60 million visitors a year, the8m4 m0 m25%0 %-25%MonthlyvisitorstoHongKong
◼FromChina
◼ From other countriesYear-over-year changein HongKong
retailsalesStart of
protestsStartof
protests1/2017 11/2019 1/2017 11/The Economic Chill From the ProtestsDATA:HONGKONGTOURISMBOARD,HONGKONGCENSUSANDSTATISTICSDEPARTMENTGoods that used to cost 25% to 35% more in Beijing
or Shanghai, for example, now sell at a much
smaller premium, says Amrita Banta, managing
director at Agility Research, a consulting firm
thatfocusesontheaffluent.AtanHermèsstore
inHongKong,a calfskinwalletsellsforHK$26,
($3,438).ChineseonlineplatformTmalladvertises
the same wallet, which ships from Italy, for
24,580 yuan ($3,589), a premium of less than 5%.
That’s a “much more fundamental” issue for
Hong Kong, Banta says. “You can’t just depend
on one nationality to support the industry. This
round of protests is a good reminder to adjust to
the new normal. Hong Kong cannot totally depend
on shopping.” Banta says she remains bullish on▶ Riot police secure
part of a mall during
demonstrations
in November▶ Workers clean up
after protests at New
Town Plaza in December