Political unrest is drastically affecting Hong Kong luxury market

The re-start of political unrest in Hong Kong over the new security law of China has wrecked a havoc on their luxury market.

Several luxury brands are planning to reevaluate their presence, while several brands like Prada, Tiffany & co and Valentino have already ceased their retail operations in the city.

The future of the luxury sector of Hong Kong appears to be bleak not only because of the flaring tensions on the streets of Hong Kong but also due to the deteriorating tourism in Hong Kong. Tourism is the biggest driver of sales, but it is not likely to return to normalcy anytime soon due to this ongoing pandemic. Luxury brands casting doubt over the future of luxury sector in Hong Kong so they are concerned about the future of their long-term footprint in Hong Kong.

As per Daniel Wong Hon-shing, CEO of property agency Midland IC&I,” Some luxury brands have already quit the Hong Kong market to focus their attention on mainland China”.

The main reason for majority of the brands to be in the Hong Kong market is that it is favorable for the mainland region. But now the luxury brands feel that they have successfully established themselves in the heart of the residents of the mainland region and they are no longer required to station themselves in Hong Kong anymore.

It is likely that the protest will continue for another six to eight months. As per Albert Park, head of department of economics at the Hong Kong University of Science and Technology, “As soon as businesses start to think this might be long-term, that’s when you really get people starting to relocate and close shops”. Park believes that in 2019, the brands thought this protest to be temporary, but with the long stretch of this protest they might go on to make more drastic decisions by the end of 2020.

In the first quarter of 2020, most of the luxury retailers have faced a plunge of sales between 50 and 80%. Clothing and footwear retailers faced the most slump in sales by 66.4%.

As per New York Times report, some of the companies and their employees were pressurized to show their support for the new approved security law.

The new security law is likely to create a long-term stabilization effect by promoting the integration of Hong Kong economy with the Chinese economy and this may be beneficial for the luxury brands to continue with their presence in Hong Kong.

Though the protest re-started again in 2020, the number of participants is in thousands as compared to two million last year. It is believed by some retailers that stability in economic condition and market will soon be restored when the security law will allow for a strong enforcement apparatus.

Presently the luxury market in Hong Kong is totally disrupted due to the Covid-19 pandemic which reduced tourism by 98.6%. The main luxury consumers in Hong Kong are the tourists, specially the once arriving from the mainland. Due to the drastic decline in tourism, many luxury brands are now making strategic plans to focus more on the local consumers in-order to recoup some portion of their lost spending.