Retail Therapy


The recent switching on of Harrods’ Christmas lights in London by the Chief Executive (Premier) of Hong Kong didn’t attract much British media attention, but it was front-page news in HK, where shopping is a way of life.

During Hong Kong’s sales season running from mid-November to the end of Chinese New Year in mid February ladies-who-lunch slog it out for pearls and cashmere in specialist shops.

Luxury is a sign of success in this high-density city-state (an immigrant population of 6.8 million crowded into only 1100 square kilometres) with a high inequality of incomes. Notwithstanding its communist credentials, this year China was ranked 89 out of 124 countries on a UN index of income inequality while Hong Kong was 84th.

People in Hong Kong, where industry is a cultural virtue, work very long hours. The rewards for success are available in every conceivable form and prominently promoted in every media. The South China Morning Post, the leading English-language daily, seems to be printed on the back of Louis Vuitton ads. Advertising supplements bulk out its editorial pages like a recent 24-page supplement on luxury watches.

Those not straining at the leash of luxury can spend hours working their way through the discount promotions that pop through the post daily. Complex beyond belief, the fine print offers credit card users discounts on computers, air conditioners, camcorders and roast pork, not to mention facials and room heaters. Then there’s the excitement of the street markets and local shops where almost everything can be acquired for a song, or two.

Local retail demand is supported by tourism from the Chinese mainland, expected to grow by 9 per cent this quarter, for the 10th quarter in a row. China’s 11th Five Year Economic Program provides for per-capita Gross Domestic Product to double by 2010 from just US$854 in 2000, and for domestic consumption to increase.HK shopping mall

Retail sales in China rose by 12.8 per cent this year and are expected to rise by 13.5 per cent next year, encouraged by an increased income tax threshold and likely increases in salaries for civil servants. Retail sales in Hong Kong are expected to grow, boosted by China’s managed floating exchange rate making goods in Hong Kong cheaper to mainland visitors.

The Closer Economic Partnership Arrangement (CEPA) is a free trade agreement between the mainland and HK that commenced in January 2004. Under CEPA’s Individual Visitors Scheme, individual mainland residents made 4.26 million trips to Hong Kong in 2004 to go shopping, accounting for 34.8 per cent of all the mainland visitors, and 20 per cent of the total visitors to Hong Kong. Prior to the introduction of CEPA mainlanders could not visit Hong Kong individually.

A tropical climate and small crowded apartments for most people make air conditioned shopping malls attractive places for many during the hot humid months from May to October. Since 1997, more than 3 million square metres of new retail, office and hotel space has been planned for Hong Kong. Much of it is built by the Mass Transit Railway (MTR), an independent corporation established under statute. Much of that development integrates commercial retail, office, residential and hotel space.

The problem for retailers and consumers in many of the developments above and adjacent to MTR stations is their sameness. Despite the number of malls the same local and international brands have outlets in most of the developments. To counter this blandness (and shape demand from the important 25–35 year-old age group with high disposable incomes and a contracting birth rate), landlords are moving to refurbish existing shopping malls to maximise rental returns.

UK High-Street retailer Marks and Sparks has been moved out of one prestigious mall while Harvey Nichols, the voguish London retailer has recently opened a 5,500 square metre branch in Central Hong Kong, and trendy Spanish clothing chain Zara is expanding the number of its retail outlets.

Lane Crawford, a Hong Kong colonial institution, has opened its new 7,400 square metre department store in the latest mega-complex, the International Finance Centre, adjacent to the MTR’s new Hong Kong station. Integrating high-end cosmetics, clothing and accessories with commissioned artworks suspended above the escalators, and tasteful screens on the walkways over its voids, this glitzy department store is said by its promoters to presage future developments on the mainland.

It is hard to reconcile a department store which is more like an art gallery with consumer demand in a developing country. However, fostering and satisfying personal consumption demand in China are roles that sit well with the patriotic tycoons who manage Hong Kong for themselves, and the central government in Beijing.

Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.