SHANGHAI — New data from Hong Kong show that January sales sank to lows not seen since 2003 as tourist spending fell in the month building up to Chinese New Year. On the Mainland, consumer sentiment appeared buoyant, with shoppers showing greater appreciation for home-grown brands.
“From November to January we saw exceptional growth,” said Paul Burke, China chief executive officer of Galeries Lafayette, the French department store that positions itself as “fashion forward and affordable.”
Located in Beijing’s downtown Xidan district, the store, which opened in 2013, saw record sales in the weeks leading up to Chinese New Year. The ceo said footfall increased by 30 percent. He also noted strong growth in the fashion and accessories categories, with an uplift for F&B units hosting families over the holiday.
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China’s economic slowdown, which has seen growth stabilize at around 7 percent, has affected luxury brands. At Galeries Lafayette — where names such as Cartier, Louis Vuitton and Chanel are absent — the picture is upbeat.
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Other upward trends include the growing popularity of Western festivals, such as Valentine’s Day, and new consumers coming into the city from suburban areas to shop.
In Hong Kong, the Hong Kong Retail Management Association said retail sales in January declined 14.6 percent from a year ago to 46.6 billion Hong Kong dollars, or $6.01 billion at current exchange, resulting in the worst monthly performance since April 2003, when sales fell by 15.2 percent amid widespread panic surrounding the SARS outbreak.
The hardest hit categories included jewelry, watches and valuable gifts, which fell by 44 percent. Clothing and footwear sales were also down by 13.8 percent in part because of warm weather. The association expects retail sales to grow by 5 percent in 2015.
Over Chinese New Year, sales in Hong Kong were soft. A survey conducted in February found that fashion accessories and jewelry and watch retailers registered double-digit drops in their sales during the holiday period.
“We believe there is a structural change in the Hong Kong retail market and the current trends will further deteriorate,” said Mariana Kou, analyst at CLSA, citing increased hostility from Hong Kong residents toward Mainland shoppers, which is making Mainland visitors feel unwelcome.
The strengthening U.S. dollar, to which the Hong Kong dollar is pegged, is also making goods more expensive and other destinations, such as Japan, South Korea or Europe, more inviting as shopping destinations.
The number of Mainland Chinese visitors to Hong Kong over the holiday period stayed flat this year, the worst figures in 20 years. Per capita spending by overnight visitors — mostly from China — also declined by 1.8 percent in 2014.
Hong Kong-based jeweler Chow Tai Fook said same-store sales declined by 4 percent during the Chinese New Year holiday season from February 5 to 22. The losses were concentrated in Hong Kong, where same-store sales declined by 29 percent. Same-store sales in Mainland China grew by 11 percent, according to unaudited key operational data released by the company. Notably, same-store sales of gem-set jewelry rose 62 percent year-over-year, while gold jewelry fell 2 percent.
This spelled good news for Mainland e-tailers as more people opted to buy online.
“Customers from tier-one and tier-two cities who used to travel to Hong Kong and overseas, are shifting away from luxury brands like Gucci and Louis Vuitton to more affordable local brands,” said Arre Shao, founder and ceo of Internet fashion company Sugarlady.com.
“The number one reason is the government’s anticorruption campaign. Secondly, it has become easier to travel abroad [to other destinations] and, at the same time, access goods through e-channels at home. There is an increasing appreciation for local products,” she said.
Yilei Wu, ceo and cofounder of Xinlelu.com, a Shanghai-based boutique retailer, said sales rose by as much as 30 to 40 percent in the peak season before Chinese New Year.
“Anything red was a bestseller — from coats to dresses and accessories. Our Chinese customers usually prefer pink but at this time of year, from Christmas to New Year, scarlet red is more popular,” Wu said.