The special administrative region is key for large companies in the sector, capitalization of Chinese tourism and throughout Asia and the purchasing power of its residents.
Hong Kong flashes again. The special administrative region that was, first, a point of conection of the world with China and, later, a fashion retail El Dorado for itself, has once again made the giants of the sector hold their breath after more than a month of protests over the repression imposed by the Government of Beijing. Why does fashion have its eyes on this region? What can the escalation of protests mean for fashion companies?
God Save the Queen sounded for the last time in the former British colony twenty years ago. Then, the Chinese government committed to a model of one country, two systems that allowed Hong Kong to develop a liberal economy, although under the control of Beijing, and it became a financial and commercial strategic hub on a global scale. Because of its freeport status, the fact that English was spoken and a coofficial language, and this economic opening, fashion was first set in Hong Kong as a hub connecting with mainland China as it became the factory of the world.
Jewelry and cosmetics are two of the most affected sectors
Then, with the development of large shopping malls and the promotion of both local and international tourism, companies began to take positions in the main commercial areas of the country. Luxury groups and, in particular, jewelery and watchmaking companies, closely linked to tourism, took refuge in Hong Kong during the crisis in the West and continue to have one of its main markets in the region.
Its main commercial area, Causeway Bay, has been competing for years with Fifth Avenue for the first position among the most expensive streets in the world to open a store. But the tension, latent and constant, with Beijing, is a permanent risk for companies operating in the city. Now, more than a month ago, that tension erupted again.
What began as a movement against a law that allowed suspects to be extradited China has become a way to agglutinate protests against the Government of Xi, ranging from the demand for greater democracy to criticism of the impact of Chinese tourists.
Swatch and Richemont are some of the groups that have reported decreases in sales
A week ago, for example, the neighborhood of Sha Tin, located near the border, went out to complain that the parallel trade with China has filled the area of perfumeries, jewelry stores and pharmacies and has increased prices.
The repression of protests has taken an increasingly violent turn, which is already having an impact on tourism. Around 350,000 Chinese visitors have canceled their visits to the country, according to Hsbc data collected by the South China Morning Post, the leading newspaper in Hong Kong.
The impact on the accounts of fashion companies is already tangible. In its hal year results presentation last week, Swatch acknowledged that “sales in Hong Kong, an important sales market with attractive margins, suffered from political turbulence; this resulted in a double-digit decline in sales”.
Nike canceled the sale in China of its collection in collaboration with Undercover after its designer supported the protests
Swiss conglomerate Richemont, also specialized in jewelry and watches, said that “sales in Hong Kong retreated, additionally impacted by the relative strength of the Hong Kong dollar and the recent street protests.”
Local operators are also suffering: Chow Tai Fook, one of the largest jewelry groups in the world and Sa Sa, a ubiquitous cosmetic chain in Hong Kong are already registering sales drops.
The impact of the riots is not limited to P&L. Nike canceled the sale in China of its Undercover collection company after its designer, Jun Takahashi, published on his Instagram a photograph supporting the protesters.
Hong Kong is resilient and in recent years has shown that it is capable of overcoming crises. It did it after the financial crisis that he suffered a year before the transfer to China; It did it when the Chinese tourists gave it (partly) his back to travel en masse to Europe and he did it after the Umbrella Revolution, one of the biggest lived in the region. At a political level, progress has been scant, but in Causeway Bay, the neons might have blinked but they have always ended up shining again.