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Hong Kong economy

Foot Locker launches a comeback in Hong Kong, kicking off with free haircuts and X-box gaming zone

In light of market slowdowns in Europe and the US, the American sports retailer is expanding its athletic-goods empire into Hong Kong for the second time, alongside other booming Asian markets like Singapore and Malaysia

PUBLISHED : Monday, 15 October, 2018, 9:32am
UPDATED : Monday, 15 October, 2018, 9:22pm

Foot Locker wants a rematch in Hong Kong. After pulling out two decades ago, the American retailer – known for its sales staff in black-and-white referee shirts – is back in the game amid a boom in the city’s US$2 billion sports shoe and athletic clothing market. It coincides with launches in Singapore and Malaysia, at a time of slowdowns in Europe and the US.

“Consumers want experiences. They want cool product with connected stories and they want it all fast,” said Lewis P. Kimble, executive vice-president and CEO-International of Foot Locker. “The global youth consumer craves the experience of touching, trying, and sharing our products in person.”

True to that goal, the flagship store in a razzle-dazzle “light cells” building in Tsim Sha Tsui recently opened with a bang: Free haircuts were delivered in old-style barbershop chairs. Xbox One X gaming consoles – the world’s most powerful – were available for play. A specially commissioned mural by local street artist Bao Ho greeted sneakerheads, as did local DJ “Miss Yellow” and Chinese rapper Bohan Phoenix.

Oh, and they were selling sneakers and sportswear, too.

That includes the widest selection of Nike Air Max Plus (TN’s) available in the market, Foot Locker says, as well as exclusive Fila styles to try to create a buzz for the store.

But could there already be too many players on this field?

There’s a mix of thinking among retail watchers about the dramatic re-entry by the iconic American brand.

There is no question the sneaker and sportswear market is booming in this city of 7.4 million people, which gets an extra boost from mainland Chinese shoppers who can even more easily zip down on the new high-speed train and the coming Hong Kong-Zhuhai-Macau Bridge.

Hongkongers walk more than any other people on the planet – an average 6,880 steps a day, compared to the world average of 4,961 steps – and a lot of that walking to the subway, to the ferry, to the job, to the grocery store, to the bus is done in sneakers. Hiking through the lush hills overlooking the South China Sea is a common weekend activity.

Where the cool kids buy their sneakers in Hong Kong

Meanwhile, more and more of the city’s workers feel comfortable wearing high-fashion sneakers and sportswear at the office. And millennials like to pick up on the trends of local sports stars, like Olympic swimmer Stephanie Au and high jumper Cecilla Yeung, who have appeared in Nike campaigns, and Japanese model and actress Kiko Mizuhara, who flacks Adidas products.

The result is rocket fuel for the local sportswear retailers: Sales of sports shoes and clothing soared nearly 60 per cent from 2012 through last year to HK$16 billion, according to a report by Euromonitor International released in March.

That is roughly split between footwear and apparel, with footwear – including performance, outdoor and sports-inspired shoes – making up only a tad more at 53 per cent.

What’s more, Euromonitor predicts the sportswear market will grow 38 per cent by 2022, to HK$22 billion, with sports clothing overtaking shoes to make up about 52 per cent of the overall pie.

Nike and Adidas lead by far, with about 19 per cent each of the shoe and apparel market.

In the dense city, easily moved about via its ubiquitous MTR subway, e-commerce accounted for only 3.5 per cent of sales last year, according to retail analyst Lawrence Wan of CBRE Hong Kong, with internet sites mostly used for research about sneakers.

So it might seem like Hong Kong would be a shoo-in for Foot Locker, whose business model is as a one-stop shop where sneakerheads can find the top brands.

Online fashion stores invest in bricks and mortar ‘to bring brands to life’

But Hong Kong has a lot of sneaker stores.

These include the splashy corner Adidas store on tony Queen’s Road in Central, and another four-storey one in Tsim Sha Tsui, just steps from the new Foot Locker located at the Yue Hwa International Building. Nike also has a big store very near that TST spot, plus others, including a glitzy shop in the heart of “Sneaker Street” on Fa Yuen Street in Mong Kok. The Mong Kok neighbourhood is packed as well with small retailers.

In addition, Foot Locker has to beat local big players with a similar “one shop, top brands” business model: Marathon (36 stores) Gigasports (16 stores), and the smaller Toronto Sports and family-run Wan Kee.

Pascal Martin, partner at OC&C Strategy Consultants, says Foot Locker has some advantages in Hong Kong.

“None of the local players [like Marathon and Gigasports] has true authority on athletic footwear as Foot Locker has,” Martin says. “The store environment and product offerings in all these retailers’ outlet are not really compelling.

“ … The opportunity [for Foot Locker] is to become the authoritative reference for customers who are really deeply into running and/or into trendy sneakers,” Martin added.

Martin said Hong Kong may not have been ready for a multi-brand retailer when Foot Locker first set up shop. But now he feels that gives Foot Locker an edge over branded stores like Adidas that “cannot provide the same breadth of choice and depth of independent expertise that FL can offer.”

The analyst predicts Foot Locker will expand in Asia and also build an ambitious e-commerce presence. The model of a splashy flagship store backed up by a robust e-commerce site is the way ahead for building brand and surviving the high rents in Hong Kong and other Asian cities, he said.

Martin also applauded Foot Locker’s launch with the pop-up barber shop and the gaming zone, which were “particularly targeted at teenage customers who are their prime target for sneakers. Probably quite effective to build traffic and create some buzz.”

At the same time, Foot Locker’s flagship store is not on the traffic-heavy Nathan Road, where it first set up shop in January of 1994 and declared of itself, “America’s greatest sports legend has arrived in Hong Kong.”

Terence Chan, head of retail at JLL Hong Kong, said, “Foot Looker must differentiate themselves from local competitors by offering limited editions and unique sports brands that cannot be located elsewhere in the market.”

Mariana Kou, head of China education and Hong Kong consumer research at CLSA, said Foot Locker’s timing is good because the new high-speed train and coming bridge will make it easier for mainland Chinese shoppers to get to the city. But she, she added, “it remains challenging for Foot Locker to outpace its competitors in a highly saturated market.”

Sebastian Fung, a 26-year-old IT specialist and gym rat in Hong Kong, said he is looking for a “journey” when he shops for sneakers.

Whether Foot Locker can win its rematch in Hong Kong may come down to whether it can convince sports fans like Fung that it offers not just the best sneakers, but also the most exciting journey in town.