Off the Coach in Hong Kong

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket

“In the past, four out of five shops were selling Rolexes,” she [Helen Mak] said. “In the future, a tourist will expect to see more varieties of retail shops in Hong Kong.”

Many luxury brands are abandoning their street-front locations as sales begin to decrease. Just this August, U.S. luxury handbag maker Coach Inc. terminated its store in Hong Kong central- with Adidas moving in after them. This has been the case with many luxury brands. As their stores close, mid-tier retailers are filling in the gaps.

A possible reason for the decrease in earnings for luxury retailers is the decline in Chinese mainland tourists to Hong Kong. After the anti-China protests last year, the number of Chinese tourists has decreased significantly, and in response, so has the sales of luxury goods, which the Chinese previously often splurged on. This decrease is shown in the graph below:

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket

However, at the same time, this provides an opportunity for mid-tier, or discount retailers to break their way into these coveted retail locations. This is an example of disruptive innovation, where discount retailers are disrupting the shopping, and invariably, life styles of the people living in these areas. It will be extremely difficult for retailers to completely replace the luxury brands people used to buy, but perhaps this change reflects that what buyers want nowadays is not only brand reputation, but variety, and this information will be crucial for companies hoping to gain an edge in the competitive market.

Source: http://www.bloomberg.com/news/articles/2015-10-27/hello-kitty-farewell-rolex-as-hong-kong-shoppers-go-downmarket