Hong Kong no longer the go-to place for cheaper luxury items: CLSA

A Louis Vuitton Speedy 30 bag is now 20% cheaper in Japan.

Gone are the days when Hong Kong is the number one go-to place for cheaper luxury items. Hong Kong is slowly losing attractiveness among tourists, and one of the reasons is non-competitive prices. Many tourists are finding it more rewarding to go to other shopping hubs in Europe or Japan because of more exciting tourist attractions and cheaper luxury goods.

"If prices in Hong Kong remain higher compared to other markets, the retail market will suffer," said Aaron Fischer, head of consumer and gaming research at CLSA, in his presentation today at the 22nd CLSA Investors Forum. He added that the strength of the USD is contributing to their negative outlook on HK retail.

The oversupply of stores in Hong Kong is not helping the sector to either. According to Fischer, some luxury brands such as Gucci, Prada, Louis Vuitton have an average of 10 stores in Hong Kong but he believes this should be trimmed down by 20-30% for profitability to be maximised. In comparison, these brands only have about 2-3 stores in Western markets such as New York.

"While sales declined, it does not mean these stores are loss-making. They might close one or two stores but they definitely won't leave Hong Kong," he added.

In conclusion, Fischer said there are only two things that could make the retail market collapse: currency-related issues and events that threaten people's safety such as terrorism or medical scares.