While high-end fashion players are grappling with uncertainty surrounding Brexit in the U.K. as well as concerns about the U.S. economy and the challenged department store sector, the top worry during fashion month was the Hong Kong commercial landscape.
The clashes between police and demonstrators, which began as a dispute over a proposed extradition bill, have taken a toll on tourism, with the total number of visitors sinking nearly 40% in August to 3.59 million, according to data released last week by the Hong Kong Tourism Board.
“The situation is troubling and certainly for our businesses, it is unprecedented,” said Peter Harris, president of Pedder Group, which operates On Pedder and the shoe division at Lane Crawford. “Through the Pedder Group’s various businesses, we have a healthy balance of loyal Hong Kong customers and visitors, but we have been impacted by customer sentiment and trading hours have been affected. Our focus has been on the safety of in-store teams and customers, and maintaining the service levels we are known for.”
The bulk of the tourism drop has come from visitors from mainland China, who have historically been a reliable source of income for high-end brands in Hong Kong.
“It’s such a crucial market, and the situation is having ripple effects because of the city’s position as a luxury and fashion center. Anything negative impacts the perception of brands throughout the world,” said Franklin Chu, managing director of Azoya International, a provider of cross-border e-commerce solutions to assist retailers looking to expand into China. “A lot of brands have been successful without making too much of an investment in e-commerce. This will be kind of a wakeup call for them.”
The government reported the worst year-over-year decline in retail sales on record, with the number falling 23% in August. Among the sectors most impacted is luxury fashion; analysts estimate that Hong Kong accounts for between 5% and 10% of global luxury goods sales.
“There is an air of anxiety and sadness all around, and people are generally reluctant to spend,” said Bertrand Mak, who founded R. Sanderson in 2016, a premium spinoff of London-based Rupert Sanderson. (The venture is a partnership between Mak and the namesake designer, who has a minority stake.) “There is a guilt [associated with] pleasure, especially retail therapy. The general consensus is to be more discreet and low-profile. People are still spending, but more online and abroad. Many are leaving the city to seek sanctuary,” Mak said.
Still, unlike the mega luxury brands that have been banking on Hong Kong to drive huge growth numbers, R. Sanderson has the advantage of being small and nimble.
“Our two stand-alone stores are in the most prestigious malls in Hong Kong: Landmark and Elements. For me, it has always been about generating experiences. We offer intimate art and matcha tea–making workshops in our stores, identifying the link between such experiences with my creations, often influenced by art. There is a level of trust that enables us to meet clients’ requests. We visit their homes and offices, or connect online via WhatsApp messaging and delivery services,” Mak said.
Harris said that Pedder Group also is accelerating its online efforts and connecting with consumers through social media. “We have seen a substantial increase of customers who may not want to visit our physical stores and instead have chosen to purchase on Lanecrawford.com,” the executive said.
In store, the retailer continues to focus on experiences. For fall, it launched an immersive chocolate experience with local artist Janice Wong and also brought design talent from Malone Souliers, Magnanni, John Lobb, Butler & Wilson and Gabriela Hearst to meet consumers in Hong Kong, Singapore and Beijing.
Outside of local operators, every high-end label is factoring the downtown into its year-end forecast. At Sergio Rossi, which has been undergoing a significant overhaul under CEO Riccardo Sciutto, momentum is building across much of the world. But Hong Kong is a critical piece to the equation. “We’ll grow this year. How much depends on what happens there,” he said.