What: Hong Kong is shifting in terms of appeal to local and Chinese customers. This is a reason for Harvey Nichols HK to close.

Why it is important: Hong Kong is not turning its back to luxury. But it falls on retailers to make sure they understand the dynamics to adapt to new consumption patterns and trends.

Hong Kong's luxury retail landscape is adapting to significant changes. The city, once a hub for wealthy Chinese shoppers buying high-end brands, is seeing a shift in tourist behavior. Visitors now show a greater interest in local culture and experiences over traditional shopping sprees. This change is partly due to the rise of new shopping destinations like Hainan Island in China, evolving consumer preferences, and an increase in online shopping.

The pandemic, along with the 2019 anti-government protests and strict COVID-19 regulations, has led to a decrease in Chinese tourists and overall visitor numbers, affecting retail sales. Luxury retailers, including Harvey Nichols, Valentino, Burberry, and Tiffany, have responded by closing stores in Hong Kong, where retail rents remain high despite a significant drop since 2019.

Despite this downturn, Hong Kong still leads in per-capita luxury spending and is expected to return to its pre-Covid sales levels by mid-2024. Some luxury brands like Louis Vuitton, Chanel, De Beers, and Bulgari are investing in the city, signaling a potential luxury renaissance. However, the challenge of competing with destinations like Hainan and changing consumer habits remains. Meanwhile, retail spaces are diversifying, with more emphasis on food and beverage outlets and less on high-end retail, reflecting the evolving market dynamics in Hong Kong.

Harvey Nichols’ closure highlights shifting luxury landscape in Hong Kong