Louis Vuitton will open a state-of-the-art emporium in Central, adding to Hong Kong's long list of luxury brand flagship stores

Sales of luxury branded goods are growing as fast as 20-30 per cent annually in Hong Kong and China, estimates Carrie Yu, a partner and retail and consumer leader for accountants PricewaterhouseCoopers (PwC).

"It is clear the Chinese elite are very luxury brand conscious and they like travelling. Hong Kong is the number one destination for both business and pleasure. I don't think this trend will change," she said.

"Hong Kong is like the Milan, Paris or New York of China. Shoppers are coming here for the bigger collections, because the goods are obviously authentic, and the pricing is better."

China has already become the world's third-largest market for luxury goods with US$631 million in sales, driven by the emergence of a 100-million strong middle class, according to PwC research.

Last year, mainland visitors to Hong Kong surged 44.6 per cent to over 12 million and accounted for 12 per cent of the city's retail sales, said Conway Lee, an Ernst & Young China partner and industry leader for retail and consumer products.

Leading brands increase presence

Mainland visitors buy 12 per cent of luxury branded products sold in Hong Kong, says Conway Lee, an Ernst & Young partner

"In the past couple of years most of these flagship stores in Hong Kong have had a facelift," said PwC's Ms Yu. "The flagship stores are to attract consumers and also showcase their brands to China as a whole."

Louis Vuitton (LVMH) is the latest of the big names to undergo a store revamp in Hong Kong. The French giant plans to open a state-of-the-art, two-storey emporium as a leading attraction in Central's swanky Landmark complex.

The Landmark's roster of top names, which includes Gucci, Fendi and Dior, was given another big boost with the September opening of a HK$100 million (US$12.8 million) Harvey Nichols store, the British luxury brand retailer's first in Hong Kong. Also stepping into the Landmark this year was French luxury shoe brand Roger Vivier, which opened its first store outside Paris in the Hong Kong mall this year.

Meanwhile, Italian fashion house Roberto Cavalli opened a flagship store in Central's ifc mall in June, and Italian men's personal care products maker Acca Kappa set up in Times Square, Causeway Bay, in July.

There's no sign that Hong Kong's growth as a luxury brand hub is running out of steam, said Ernst & Young's Mr Lee.

Leveraging the Hong Kong image

"Hong Kong is an international financial centre and an advanced, business-minded, materialistic city. It provides a distinct image to luxury brand companies setting up shop in Hong Kong and it signals to mainland Chinese that they are purchasing a world renowned luxury brand," he said.

The luxury sector has also been investing heavily in China, but it would be a mistake to think that longer term Hong Kong is going to lose out to China in the sector, says Annie Bingham, a vice-president of executive search firm AT Kearney.

"Hong Kong will always be the jewel in China's crown," said Ms Bingham who specialises in the luxury goods sector and is herself a former senior manager for names like Laura Ashley, Chanel and Yves Saint Laurent. "I think there is enough business to go around. There's this voracious desire for luxury today."

Hong Kong also has the edge in terms of its world-class service quality. How Hong Kong treats its VIPs is "way above other countries," said Paris-based Ms Bingham.

During a recent trip to Hong Kong she was particularly impressed by Lane Crawford's new HK$200 million (US$25.7 million) 7,600 sq metre flagship store at Two ifc in Central, which features a host of apparel collections from leading brand names like Paco Rabanne and Lanvin.

The Hong Kong and China stories are "all interrelated", says PwC's Ms Yu. Many Chinese consumers only go window shopping at luxury brand stores on the mainland, which has a 30 per cent luxury goods tax. They wait to make their actual purchases in Hong Kong which is a duty-free port.
 
Hong Kong's status as a regional aviation hub means it is ideally placed to also capitalise on the strong demand growth elsewhere in Asia for luxury products.

Indeed, Hong Kong International Airport has become a haven for luxury shoppers, many of them Chinese travellers transiting through Hong Kong to take flights to the West. "Most of the luxury brands have stores there -- it is unique in the world and has a lot of traffic," said Ms Yu.

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