Hong Kong rents too high even for Gucci, so pity the small guys

Hong Kong labels and independent local retailers that contribute creativity to the city's fashion industry could be pushed out if landlords continue to be so greedy

PUBLISHED : Monday, 17 August, 2015, 2:37pm
UPDATED : Tuesday, 18 August, 2015, 10:48am

Hong Kong's economy has been shaky ever since the Occupy protests, with spending down across the board. What was once deemed a blip now looks to be a problem that may have long-lasting effects. Luxury giant Kering, which owns Italian brand Gucci, has been in a dispute with Hongkong Land over its sky-high rent, and says it might consider closing stores in the region if the problem isn't resolved, as reported in the Post last week.

Burberry, also experiencing falling sales, has expressed similar intentions, while watch brand TAG Heuer announced recently that it's closing its Russell Street store in Causeway Bay owing to high rent.

Hong Kong used to be a sure thing for big fashion and luxury stores. This new uncertainty is creating a general lack of confidence in the economy. If even these luxury giants, usually supported by steady, enthusiastic mainland spending, are wobbling, what does this mean for other fashion brands and stores?

Those that have always felt the pinch of Hong Kong's cutthroat rents are the small businesses and indie labels. Not only have they been overshadowed by multinational luxury giants in terms of consumer recognition and spending, they've also been either squeezed out of up-and-coming areas or never given a chance to open a shop in the first place.

"It's unfair how the law and rental system tend to protect only the landlords here," says Hong Kong-based designer Marco Vedovato, of start-up men's tailoring label Iter Itineris. He used to have a flagship store in Central, but had to move to Wan Chai's Sun Street. He adds: "Due to the climate, shopping practice and the city's infrastructure, it's almost impossible for an independent label to survive unless they are given a huge budget to play with."

Designers such as Johanna Ho, a veteran of the Hong Kong fashion industry, opened her first flagship store on Wyndham Street in Central last year. Despite being one of the most recognised local names in fashion and supported by media and celebrities alike, it still took her more than a decade to get the store and, even now, she says it's a challenge.

"I won't lie and say that we are not struggling [with the costs of running the label]," Ho says. "Having the logistics of a store, having prices rising all the time with production in China and then, of course, the rising rents here in the city.

"The crazy fact is that even though the economy is not doing well, landlords insist on raising rents. We are reconsidering whether to keep the store open. It's sad and it was a big leap to have a real standalone boutique, and I feel very proud to have done it, but at the end of the day, business is business."

In a city of mega malls and high streets lined with the same international fashion brands, small visible local operations such as Ho's are vital to the retail and fashion landscape. They are arguably what give a city character.

Stores such as Liger; or Sheung Wan's Niin's jewellery boutique and Square Street; Shine in Causeway Bay; and Vein, Kapok and Delstore in the Star Street area of Wan Chai are gems of the local fashion culture. Even if not all of them stock Hong Kong designers, they are Hong Kong-grown and independent retailers that contribute creativity to the local industry. But all these stores could be pushed out if landlords continue on the current path of greed and focusing only on the bottom line.

Today, Ho says that "businesswise, there's more a move into e-commerce." And if the online retailers sprouting up in the city are anything to go by, the move to digital is in full swing. This is both a sign of hope and of frustration, as physical retail is clearly failing local creatives.

Tania Reinert, co-founder of local sustainable fashion e-tailer A Boy Named Sue, explains her decision to forgo a bricks-and-mortar store in the city: "We chose to go online to have a deeper global reach as our product was quite niche, but we had a goal to open a store since Hong Kong customers often prefer physical shopping over online. But after analysing costs, we realised it would cost HK$40,000 minimum to rent a small space - so we gave up."

While there might be a few interesting start-up projects around and some government funding for the industry, the reality is it's extremely difficult for start-ups to find affordable spaces with high traffic.

"This means the city is full of big boys with big budgets," says Reinert. "Independent boutiques are a real rarity."