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Malls make life hard for department storesBrand-crazy mainland tourists and locals drift away from old-style shopping centresCeline Sun22 February 2010Brand-crazy mainland shoppers are adding to the woes of Hong Kong’s once mighty department stores as they shun them in favour of upscale malls and luxury goods outlets.Traditional department stores, which once boomed in the city, have faced major challenges following the rise of shopping malls and people’s changed shopping habits.The hordes of mainland tourists that descend on the city every week are particularly fond of the famous brand outlets, located at malls such as Times Square and Pacific Place.It was not always so. A weekend trip to a department store such as Sincere or Wing On was a must for most Hong Kong families up until the 1990s. Children could shop for toys, fathers for ties and shirts while mothers could get everything from handbags to kitchen utensils.Local department stores first faced serious competition in the 1980s from Japanese rivals. Then a more ominous trend emerged, with the rise of shopping malls. Over the past two decades the number of local department stores has dropped to only a few survivors. Malls have all the “under one roof” convenience of a department store with the added attraction of name-brand outlets. Beijing resident You Xiaojia, a regular shopper in Hong Kong, is familiar with most major retail areas in the city. She and her husband visit at least once a year to purchase clothes, accessaries and cosmetics.But like most mainland tourists, her itinerary is usually filled with visits to shopping malls. Traditional department stores are seldom on the “to do” list.“I dropped by a department store in Central a few years ago but to be honest, I don’t think I will go again as it doesn’t have the brands I’m looking for and it’s also far away from the places where I usually do shopping,” said You, 33.During their latest trip to Hong Kong last December, the couple spent around HK$60,000 buying a Chanel handbag, a Hermes leather belt and several T-shirts from other luxury brand stores.You’s attitude is typical of mainland shoppers, who have been the main driver of the city’s retail industry over recent years. That means department stores are benefiting less than shopping malls from the customer inflow across the border.From 2004 to 2008, the total floor space of the city’s shopping malls increased by 1.7 million square feet on average every year, with new mega shopping centres rising one after another.By contrast, the once-flourishing department stores have closed or transformed into other businesses. The century-old Sincere and Wing On department stores are among the few survivors.Hong Kong’s retail market in the 1970s and 80s was dominated by department stores, particularly Japanese-owned outlets. Causeway Bay at one time was dubbed “little Ginza”, with Daimaru, Mitsukoshi, Matsuzakaya and Sogo dominating the district. The giant billboards with Japanese characters and Japanese-made goods in the windows made people feel as if they were in Tokyo’s premium shopping rather than Hong Kong.Eliza Lo Siu-wai, general manager of Lifestyle International Holdings which manages Sogo Department Store in Hong Kong, still remembers the store’s opening on May 31, 1985. “That day was also the opening date of the MTR Island Line,” she said. “It was just like a big festival in town. So many people flooded in.”At the time Chinese-owned department stores also had an important share of the local market, along with British ones like Lane Crawford and Marks & Spencer. The big home-grown department stores included Sincere, Dai Dai, Wing On and Dai Sin. Some mainland department stores such as Yue Hwa, Hwa Fung and Chinese Arts & Crafts were also popular.In their golden era in the 1970s and 1980s, department stores were inspired by the grandeur of their counterparts overseas, with some featuring nightclubs or indoor amusement arcades on top floors.
“Department stores represented a new way of shopping at that time. The basic idea was that you could find everything you needed, from a bag of salt to a diamond ring,” Lo said.In addition, “no-bargaining prices”, the issuing of receipts and after-sale services impressed those used to buying from small street shops.The boom began to falter in the 1990s and early 2000s as the Asian economic meltdown and epidemic outbreaks including bird flu and Sars hit home.Many Japanese stores hit by the poor economic conditions at home closed their overseas branches, including ones in Hong Kong.Following the withdrawal of Daimaru and Matsuzakaya from the city, Sogo also sold its Hong Kong shop to local property tycoons Joseph Lau Luen-hung and Cheng Yu-tung at a cost of HK$3.5 billion. The last of the four Japanese stores to leave Causeway Bay was Mitsukoshi, which was forced to close after landlord Hysan Development refused to renew its lease.Meanwhile, local and mainland department stores also hit hard times. Dai Dai, Dai Sin and several others all shut in the 1980s due to high rents and keen competition. The survivors turned their focus from shops which sold everything to focus more on a specific range.Yue Hwa and China Resources turned part or all of their business into smaller shops to sell Chinese medicine and health products. Wing On focused on selling clothes and kitchen utensils.Sincere, the oldest local department store in the city that operates outlets in Central, Mong Kok and West Kowloon, has also changed the goods on its shelves over time.“We used to have a very big toy department but not any more as there are many specialty shops selling toys,” said Philip Ma King-huen, managing director of Sincere Company. “Now we focus on fashion, and family products.”Ma attributed the company’s long-lasting business to a stable customer-base throughout the retailer’s 110-year history.One of Sincere’s most loyal customers is 56-year-old Winnie Tam. A Sham Shui Po resident, she drops by the store twice a day before and after buying fresh food at a nearby market. “I’ve been a regular at Sincere for four decades,” said Tam. “It’s always reliable. It never sells fake goods.”Ma said Sincere buyers boasted decades of experience, sourcing everything from a cashmere scarves to winter jackets. “The shopping malls lease out to big brands, but we run our own merchandising teams. This means we can scout for goods in remote areas of Italy, allowing us to offer goods of the same quality but at a price 50 per cent lower than the famous brands,” Ma said.“Customers have to go to somewhere else if they are looking for big brand names. But we can provide a one-stop service; customers who buy a dress downstairs can buy a handbag and shoes in the same store.”One department store catering to the demand for branded goods is Sogo. Running two multi-storey stores in Causeway Bay and Tsim Sha Tsui, the company has introduced mainstream branded apparel and accessories in the form of consignment counters.“For some low-profit margin products like men’s caps and gloves as well as the food in our supermarket, we still need to source the goods by ourselves,” Lo said.Enjoying high popularity on both sides of the border, Sogo’s Hong Kong arm recorded revenue of HK$2.8 billion in the six months to last June, around one fifth of total Hong Kong department stores sales and 2 per cent of the city’s retail sales.“Many people love to buy at department stores because they feel no pressure about touching or inspecting the products. In an open space like this, you find what you want easily by a glance at the shelves,” she said.Besides the lack of branded goods, traditional department stores are finding it tough to compete against the big malls because shoppers can also dine at places like Festival Walk and Times Square. Food and beverage areas usually account for 20 to 30 per cent of the total business area of a mall, whereas for department stores it is below 5 per cent.
Maureen Fung Sau-yim, general manager for leasing at Sun Hung Kai Real Estate, said malls had become shopping and leisure centres in which people could purchase, eat and relax. Fung, whose company runs a dozen shopping malls and centres, said shopping malls cannot replace department stores totally as “each of them has its own niche”.In fact, the property company is planing to open a department store to sell duty-free luxury jewellery and watches inside The Sun Arcade, a Sun Hung Kai shopping mall in Tsim Sha Tsui this year. “This is better than renting the place to separate shops because the department store can offer over 20 brands for people, especially mainland visitors,” she said.
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