Opening gates to name-brand shopping

As little as two years ago, Hong Kong offered limited options for shopping for name-brand fashion at affordable prices. You either had to wait forever for prices to be cut at the official stores, or buy a second-hand item at Milan Station or auction sites. What discount outlets Hong Kong had tended to be faraway warehouses in shabby industrial buildings.

Now, however, there is an alternative. Citygate Outlets, at Tung Chung, is Hong Kong's first mall grouping many high-end brands but carrying discounts of between 30 and 85 per cent year-round.

Originally, Citygate Outlets was just another community mall in Tung Chung. With Tung Chung's population never reaching the original estimates when the town was planned, Citygate struggled and underperformed in the early part of the decade. Only 60 per cent of the mall was occupied, on average, and some stores had never been leased.

Swire management, which operates the mall, took a review and decided to convert the mall into the first and only outlet mall in Hong Kong.

The concept of an outlet mall was different from a conventional sales shop, said Tim Jones, senior portfolio manager of Swire Properties Management. Sales shops tended to be 'dumping grounds' for outdated goods and so kept only basic interior decoration and levels of service, he said. Outlet stores strived to maintain the same appearance and service as other, regular stores. The only difference was that the goods there were much cheaper.

The reason brands can afford to open outlet stores is because they can shorten the sales period of low margin goods, while ensuring that consumers enjoy a quality shopping experience that lives up to and promotes the brand's image. They provide a lower entrance threshold for new customers who may become attracted to the brand through the year-round discounts.

Some shops sell products that are exclusive to their outlet stores. Shoemaker Bally sells grade A samples in the Citygate outlet store that cannot be found anywhere else in the world, for example.

'We noticed there were sales shops dispersed all over Hong Kong in an ad hoc manner,' said Mr Jones. 'This doesn't match the mall development of the rest of the world. The United States, Europe and Japan have developed many mature outlet malls.

'The outlet mall concept is in no way new to Hong Kong people, who are well-travelled and many of whom have shopped in outlet malls in other countries. Hong Kong is getting more sophisticated shoppers who want outlet malls.'

Citygate has several advantages in being an outlet mall, according to Mr Jones. It is far from the core retail area in Hong Kong, which provides good brand protection. Yet it is part of a well-developed transport system. It takes less than 30 minutes to get to Citygate from Central, either by rail or through a good bus network.

Tung Chung is also the gateway to many tourist sites on Lantau and is home to a 440-room hotel - the Novotel Citygate Hong Kong - the six-screen UA Citygate cinema and many food and beverage outlets including the newly reopened food court Food Republic.

Citygate was built to capture sunlight. Swire decided to turn it into an outlet mall and changed the interior to further emphasise that. The mall now uses a lot of plants and outdoor materials to create the ambience found in other outlet malls outside of Hong Kong.

The conversion of Citygate made Swire the only Asian finalist in the International Council of Shopping Centres' (ICSC) MAXI Awards, an international marketing competition that recognises excellence in shopping centre marketing. Swire recently won a silver award. It is the best result obtained for an ICSC MAXI award for a Hong Kong mall.

The last time Hong Kong won MAXI awards was in 1999. They were given for the Pacific Place Christmas promotion and Festival Walk for its grand opening.

Both malls are managed by Swire Properties.

'The award indicated that Citygate Outlets has successfully transformed and is getting international recognition,' he said.

But success did not come easily. When Swire proposed the conversion concept to big brands, the brands said they welcomed and supported the idea. Very few of them, however, agreed to make any commitments to the mall as they did not want to be the guinea pig.

Mr Jones' team therefore started with mass brands, which were more receptive and more readily agreeable to making commitments. That got the ball rolling and with the first few names, Levi's and Sporthouse, under their belt, the Swire team slowly built up a portfolio and reputation, gradually moving towards the high-priced brands.

This was a dramatic change for the former community mall, and is especially apparent in the bridge connecting the two phases of Citygate. Originally, the bridge was populated by kiosks selling tourist products and handicrafts. It now houses high-end brands Bally, Polo Ralph Lauren and Vivienne Tam.

Mr Jones said that once one brand leased a store on the bridge, the others followed suit immediately and he once leased six to seven stores in the same month.

Momentum was gathering among the community as well as more people found out about the mall. It is now common to see long queues whenever new stores open or when some stores drastically cut prices.

The success of Citygate benefited the brands as well, with sales exceeding expectations. The monthly sales targets were reached within the first few days of the month and sales per sqft in the mall are now comparable with other established outlet centres worldwide. Citygate's occupancy boomed from 62 per cent to 98 per cent in the past 18 months.

'When people go into outlet malls like ours, they enter a different emotional state,' Mr Jones said. 'They are open to more impulse buying. As in our slogan, they come here to 'treasure hunt'. They look at the money they save rather than the money spent.'

Citygate has steered clear of conventional marketing. While other malls are trying to convey the message that malls are not only for shopping, Citygate tells the consumers to go there solely to shop. They are banking on the discounts to motivate people.

The lure is sometimes too much even for Mr Jones, whose office is just above the outlets. 'It's very hard to resist. Everything there is on sale. All of our staff got our sneakers down there.'