Hong Kong: Strength in Numbers

Good outcomes can sometimes result from challenging circumstances. In Hong Kong, it started with SARS.

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Good outcomes can sometimes result from challenging circumstances.

In Hong Kong, it started with SARS. When the city was devastated by an outbreak of Severe Acute Respiratory Syndrome in 2003, virtually no tourists visited, delivering a blow to a city that had been an acclaimed shopping destination.

"There were only eight rooms booked at The Peninsula," recalled Shirley Chan, vice chairman of the Hong Kong Retailers Marketing Association. "People were scared, it was a gloomy time. So China opened the Individual Travel Scheme tourist program, giving people permits to come to Hong Kong."

That decision proved monumental — for both Mainland Chinese, who became able to travel independent of tour groups, and for Hong Kong, which saw a remarkable change to its retail environment. The resulting numbers were staggering.

"There are several thousand people coming every day," said Paul Husband, managing director of Husband Retail Consulting. "There are something like 16 million to 17 million Mainland Chinese here each year, out of 28 million total visitors. It's the biggest single factor in retail today."

In the Nineties, it wasn't unusual to see queues of Japanese tourists outside Louis Vuitton and Tiffany & Co.; now the velvet ropes also corral eager Chinese shoppers.

"People come here because we don't have sales tax and we don't have duty — so prices are more competitive. At the same time, there were so many fakes in China, people also came here to find genuine products," explained Chan. And as the influx of Mainland tourists grew, "a lot of international brands took the opportunity to open here."

Ever savvy, Hong Kong's property developers anticipated the change. In 2005, a consortium of developers built the International Finance Centre in front of the new ferry piers. Lane Crawford, the region's leading specialty store, moved its flagship there to take advantage of the traffic.

Similarly, Hongkong Land, Central's biggest landlord, made bold moves. "Hongkong Land wanted the biggest stores and the biggest brands," said Husband. "A 10,000-square-foot store is very expensive to build — it's millions of U.S. dollars. But finding the space for luxury brands has made Hong Kong an even more interesting place to shop."
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