ExclusiveGlobal luxury giants LVMH, Hermes eye expansion on China’s Hainan Island in blow to shopping hotspot Hong Kong
- Hong Kong’s total volume of mainland consumers will certainly drop as luxury brands are likely to continue increasing investment in mainland, especially Hainan, analyst says
- But luxury firms might not open free-duty shops before 2025 as that could negatively impact their stores in other Chinese cities
In a blow for Hong Kong, global luxury goods companies such as LVMH Moët Hennessy Louis Vuitton (LVMH), Hermes and Richemont are exploring opportunities in China’s Hainan province, as they eye expansion in the world’s second largest luxury market.
While LVMH and Hermes were eyeing new stores in the province, Richemont was investing more in Hainan and was planning to expand its local team, according to sources. Any pivot to Hainan will coincide with store closures in Hong Kong and could have a longer term impact on luxury retail in the city.
“Luxury brands will likely continue to increase investment into the mainland, especially Hainan, if people still don’t see much hope for the reopening of borders,” said Jonathan Yan, the Shanghai-based principal of consultancy Roland Berger. The impact on Hong Kong will be big, he added. “People from surrounding provinces, such as Guangdong, may continue to buy stuff in Hong Kong. But its total volume of mainland consumers will certainly drop.”
The exploration of opportunities in Hainan by luxury companies comes amid an increase in China’s importance to the sector during the coronavirus pandemic. The Chinese global luxury goods market accounted for 32 per cent of all global luxury goods sales last year, and was set to surpass the US to become the world’s largest in five years, according to Euromonitor International. In 2019, the country accounted for 11 per cent of all global luxury goods sales, according to data from Bain and Company.
Luxury companies, which recorded strong performances in the first three quarters of this year, were buoyed by demand from China. LVMH, which is the largest luxury brands group in the world and owns labels such as Celine, Givenchy and Christian Dior, saw organic sales of its fashion and leather goods surge 57 per cent in this period from a year earlier.
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Hermes, which reported “a remarkable performance in Greater China and other countries in Asia”, said sales had jumped 63 per cent in Asia excluding Japan in the period. It also opened its 28th address in mainland China in September.