Louis Vuitton is reportedly the first major international luxury brand to respond to the impact of the anti-government protests in Hong Kong by shutting down one of its stores in the city.
According to sources familiar with the matter, the brand, which is owned by luxury group LVMH, plans to shut its store in the Times Square mall in the shopping district of Causeway Bay, after the mall’s owner, Wharf Real Estate Investment Corporation (Wharf Reic), refuses to lower rent.
Louis Vuitton has eight stores in Hong Kong, one of them in the nearby Lee Gardens mall, just a four-minute walk from Times Square. It has previously announced plans to open a ninth store at Hong Kong International Airport in 2021.
The French label’s large retail footprint in the city, which is similar to that of other luxury brands, made sense in the past when Hong Kong attracted large numbers of shoppers from mainland China, who travelled to the city to take advantage of lower prices for luxury goods. (Hong Kong is a free port and does not impose customs tariffs on imported goods.)
This “repatriation” of luxury spending, however, precedes the protests and reflects a diminishing price gap between Hong Kong and mainland China for luxury products. Luxury sales in Hong Kong are driven mainly by international travellers, and visitors from China account for up to 70 per cent of purchases in the luxury sector.
Louis Vuitton pays an estimated HK$5 million in monthly rent for its 10,000 sq ft store in Times Square, according to industry consultants. Luxury brands pay similar rents for stores in prime locations elsewhere in the city.
As a leader in the luxury sector, Louis Vuitton sets trends not only when it comes to fashion but also retail and business strategies. It is too early to say whether the decision by the largest luxury brand in the world to close a prime Hong Kong store will have a domino effect, triggering more prominent store closures in the city’s luxury retail sector in 2020.
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