Wharf Holdings Ltd

Virgin move a sign of the times in HK

PUBLISHED : Thursday, 30 March, 1995, 12:00am
UPDATED : Thursday, 30 March, 1995, 12:00am

WHAT Hong Kong wants to hear today is that the postponement of the Virgin Mega Store deal was because of friction between the two sides; or a desire by Wheelock not to hurt its sister company, Wharf, which is the landlord of Tower Records in Times Square; or that mercurial Richard Branson has just had other ideas, like ballooning from Hong Kong to Australia.

What people do not want to hear is that a shrewd retailer has looked hard at Hong Kong's economic climate and decided that the margins are not worth the risk of investing in a greenfields site.

But that is the message emerging from the news that the deal is on hold.

It is yet another confirmation of what anyone who looks around the shopping malls and retail streets can see for themselves.

That is that the feel-bad factor and the margin-slashing level of rents and overheads are taking their toll.

Virgin stresses that its move was made after a study of the music retailing industry, but the implications are as strong for every other sector relying on impulse buying.

Much of Hong Kong's retail sector depends on the readiness of its people to buy things that they do not really need.

Demand for rice and salt vegetables is pretty inelastic: the desire to buy compact discs, video cassettes and computer games is only as strong as the buyers' sense of well-being.

The same lesson is being learned by restaurateurs who were happy to watch customers throw the credit card on the table without a second glance at the bill.

Now it is fixed price menus, smaller tips, and do not bother to show me the wine list.

It is even possible to walk into dining holes where once bookings had to be made days in advance.

Analysts expect grimmer times for retailing, as volume sales stagnate.

Last month seemed to prove them wrong with retail volumes up by seven per cent year-on-year, but a longer period is needed to show that the steady decline seen last year is really pulling around.

It might be that the only cure for this is a return to the days when property prices were soaring, and everyone felt good.

When values go up by the day, the cost of the mortgage can be ignored.

Right now, it is gripping many people so tight, they cannot get their hands into their pockets to buy anything.