Designer-bag business makes dreams come true
Since its colonial days Hong Kong has never ceased to be a 'city of dreams' for those who aspired to wealth and success.
In the minds of many Hongkongers there's a belief - unshaken by the passage of time and the great changes that have occurred - that anyone can make a fortune in the business-friendly city regardless of where they come from and what their qualifications may be.
Byron Yiu Kwan-tat is living the Hong Kong dream. The 42-year-old former hawker and waiter is floating his outlet for second-hand designer handbags, Milan Station, in a HK$270 million initial public offering that is scheduled to be launched on Wednesday.
Looking trendy in a neat grey suit with white leather shoes in one of his busiest branches in Causeway Bay, Yiu smiled and greeted customers.
'You're the boss? Congratulations,' said a customer in the Percival Street store after finding out about Milan Station's listing plan.
'Thank you. You've come to buy my handbags, and now you can buy my shares,' Yiu quipped.
Milan Station resells previously owned bags. But it is not the usual designer-for-less store offering old and outdated products. In its outlets you can find the latest 'in' or 'limited-edition' bags, and they may find their way on to its shelves even before they can be found in their primary outlets.
That ready access to bags that original owners may have to line up to order means that prices for some of the bags in Milan Station are even higher than at their designer outlets.
Since it has no dealings with the designers who make the bags, Milan Station is in essence a free trader. Its assets are backed mostly by its inventories - unused and second-hand bags from designers such as Hermes, Louis Vuitton and Chanel.
The business, therefore, requires a fast turnaround to generate regular cash flows to cover rent and staff expenses.
On average the bags sit on the shelves for just 52 days, and Yiu relies on his contacts, 'mainly the rich 'tai-tais' who live in the Mid-Levels', to sell him the stock.
'We don't make bags. If a certain brand becomes unpopular we'll just switch to another. The important thing for us is to have sufficient stock. People know who we are and they'll bring in their bags to sell to us.'
Yiu was in the fashion business collecting second-hand clothing from local celebrities long before he started focusing on handbags 10 years ago.
More than 80 per cent of the bags in stock are from the public, including Yiu's close-knit network of socialites and so-called trophy wives - many of whom are Hong Kong VIPs and celebrities and are likely to get their bags first while everyone else has to be on the waiting lists.
Because of Yiu's network, Milan Station has always had an association with the entertainment industry and high society. He has since become a celebrity himself, with his whereabouts regularly reported in tabloids and glossies. He is a member of the exclusive Jockey Club and owns a horse named Super Brand that he bought for HK$2 million. 'I have always liked horses,' he said. 'I like riding and I like putting down a few bets.'
But it's the handbags that attract the headlines for Milan Station. The outlet recently sold a Hermes Himalayan Birkin crocodile-skin bag with diamond finishings for more than HK$2 million, a record-breaking price. Hermes bags have been fetching good prices at auctions and there are keen collectors.
Last year, at a Christie's International auction of Hermes bags, a Russian client paid GBP42,050 (HK$534,600) for a 2010 Bleu Abyss crocodile-skin Birkin.
A black crocodile-skin Birkin handbag went for GBP49,250 at another Christie's sale.
Not every Hermes bag owner sees the bags, which come in a price range of US$7,000 to US$150,000, as collectibles. 'What's the point? The value of the bag would not go up. They are not gold or silver. If you have bought a new mobile phone, would you keep your old one? You'll sell it. It's same with bags,' Yiu said.
Hongkongers are easily bored with what they have and Milan Station offers them a platform to trade off bags that they don't want, he said.
The outlet has successfully captured the consumer culture of Hong Kong, which is preoccupied with buying the newest products. Its revenue last year was a staggering HK$730.3 million, up 19.5 per cent from 2009. Net profit grew 38.5 per cent to HK$54.3 million from 2009.
Sales to mainland tourists have gone up significantly since 2003 when the Individual Visit Scheme was introduced allowing travellers from the mainland to visit Hong Kong and Macau more freely.
Consumerism is catching up among wealthy mainlanders, and Yiu wants to build his business empire there with the same concept. Milan Station plans to set up 24 new outlets in Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou and other mainland cities in the next two years.
Asked what his favourite bag is, Yiu pointed at the Hermes collection in the store. 'What is better in the world now than bags?' he chuckled.