China's big spenders turn Macau into a luxury brand shopping destination

With its huge casinos and glittering hotels, Macau has established itself as a top tourist destination for wealthy mainlanders in recent years.

But it's not just the city's famed casinos - 36 of them generated US$38 billion in gaming revenue last year - that are crowded. The real buzz is coming from the city's luxury boutiques, many of which dwarf their Hong Kong counterparts in scale, profitability and range of exclusive products.

According to Macau's Statistics and Census Service, the number of visitors from the mainland grew 16 per cent year on year to the end of the third quarter of 2013, accounting for 63 per cent of total visitors. In the past year, several luxury brands such as Tom Ford, De Beers and Tory Burch have opened stores in the city.

A walk through T Galleria at DFS in the Four Seasons Shoppes - which is the retailer's largest store globally - reveals the extent to which luxury brands dominate. Customers can shop for more than 700 prestige brands in one location, including Hermès, Zegna, Celine and Prada. Just before Christmas, the retailer launched an exclusive collection of limited edition products called Red featuring items created by 12 of its brand partners, including Balenciaga, Dior and Miu Miu.

With more than 75,000 visitors a day, it's no surprise that some stores for various brands in Macau are ranked top 10 in the world. Today, the fashion retail scene rivals any big fashion capital and has grown from US$625 million in 2007 to US$4.2 billion by 2012.

"In 2007, the luxury retail industry was centred on the Mandarin Hotel, and there was nothing else. Then the Wynn came along with its luxury boutiques and was completely out of the box. The Venetian and the Four Seasons opened in succession over the year, totally changing the scene," says Michael Schriver, chief operating officer of DFS Group, which opened its Galleria in the city in 2008.

"I remember when we started to lease out the 330 retail spaces at the Venetian in 2005. The comment we kept hearing was that Macau is for gaming, while Hong Kong is for shopping. It took a couple of years for patterns to change but thanks to the growth in gaming, retail has come along for the ride," says David Sylvester, senior vice-president of global retail at Sands Retail.

According to Carmela Leong, director of New Yaohan Fashion, which operates the city's only New Yaohan department store, shoppers in Macau are quite different to their Hong Kong counterparts. While Hong Kong has a diverse mixture of local and international shoppers, Macau has no local market to speak of owing to its small population (about 500,000 residents). Instead, luxury and fashion retail is dominated by big spenders from China who "may not want to buy sales items, but more expensive items," says Leong.

"It's difficult to say what drives them. Most of the time they are on holiday, so they are happy to spend. Other times they make purchases because they are superstitious - many believe if they win they need to buy something to hold on to their luck when they return," adds Schriver.

As is the case in Hong Kong, top luxury fashion brands such as Dior, Chanel and Prada do well in Macau. But shoppers in Macau are especially keen on watches and jewellery, which account for 29 per cent of total retail sales.

"It is even more high end than Hong Kong because of the segment of high rollers who spend freely," says Schriver. "The watch clients we have are generally quite sophisticated - they know what they are buying."

But it's not just bling they're after. Leong says that accessories including leather goods and handbags also perform well, as they are identifiable and still considered aspirational. Cosmetics and fragrances are popular for travellers. Interestingly, the segment that has the most potential to grow is ready-to-wear.

"Once they have satisfied their wants on watches and jewellery, it's all about looking good from head to toe. High-end luxury brands such as Prada and Hermès are still favourites, but this is slowly changing. With the aid of Chinese media, customers are becoming fashion conscious and are starting to explore emerging fashion brands," she says.

With this in mind, Sands Retail plans to bring a new retail concept to the city next year. Shoppes at Parisian will offer a brand mix that focuses on emerging ready-to-wear and accessories labels.

"Now that fashion is starting to pick up, we have developed this new direction for the Parisian. We are pulling back on accessories and some brands we are talking to will come just for ready-to-wear even if they have already have an accessories store.

"It will be an interesting mix, and more creative so that it will appeal to a more sophisticated savvy shopper who doesn't just want handbags," says Sylvester.

"We are trying to bring a heap of new brands, rather than grab what's in Hong Kong already. At the moment everyone knows that the big brands are doing well but how many can you roll out? With malls, it's important to position yourself differently so we don't cannibalise ourselves and the business."

With the market growing rapidly, competition is also rife. As such, the biggest challenge for Macau-based retailers is to differentiate themselves from the rest of the pack. A unique product offering isn't enough, which is why customer service has become extremely important.

"One of our biggest challenges is recruiting a sufficient quality of staff as there are restrictions to the amount of labour you can bring in. That being said, it's all about service because it's hard to differentiate the product itself. It's about providing incredible service and extraordinary experiences. Everyone wants this customer so you have to treat them better than the next," says Schriver.

For Sylvester, it's all about creating a unique concept through elements such as design.

"It's not about shops any more - people want entertainment concepts, or a cool environment with a theme. This is the future for shopping malls. So while service is important, you need to layer it together with all these things so that when people come they are not just visiting a regular mall," he says.

Looking ahead, the future is bright for Macau as luxury fashion shoppers move away from the peninsula towards the more developed Cotai area.

Between now and 2016, there are plans to add more than 33,000 rooms to the area, doubling the hotel room capacity to over 50,000 rooms by 2017. With the number of visitors set to rise, will Macau eventually take over Hong Kong as the top shopping destination for the Chinese?

"That's many years away, I think. Just look at the volume of sales in Hong Kong - Macau cannot match that," says Sylvester. "But I think there's a piece of the pie for both markets. I never see us taking over Hong Kong. We need to make Macau unique so the experience is different."

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