Hong Kong Needs to Up Its Game
The Hong Kong economy is heavily dependent on the economy, trade and investment flows of the Chinese mainland. In recent years Hong Kong has benefited from a huge surge in higher-spending tourist visitors from the mainland, as well as a significant rise in mainlanders buying high-end luxury property in Hong Kong.
All of these facts are not only well-known to business executives, economists, and government officials, but to anyone who watches TV, reads newspapers, or gets their news online in Hong Kong.
A few weeks back there was a firestorm of outrage at the video clip of a Hong Kong tour guide who verbally abused her mainland tour group for not spending enough money on shopping.
The young lady in question, first an object of public scorn, later won some sympathy points by facing the media and explaining that her income is 100% dependent on the tour group’s shopping expenditures (ie she gets zero basic salary or benefits).
Low-end tour group organizers charge rock-bottom prices to join the tour, and then aim to generate the real income from the retail spending of the tour group members, who are led to “cooperating” retail shops and restaurants.
Zero salary or not, the young tour guide’s attitude was rude, obnoxious and unacceptable; but that’s not the main point.
What’s most at fault is the attitude and approach of the management of the tour organizing companies and their business partners, which in effect conspire to fleece tour visitors from the mainland. This is not a new or recently uncovered problem, yet it persists. The Hong Kong tourism industry needs to urgently rethink its approach.
How can this possibly be a responsible and sustainable approach to developing Hong Kong’s tourism industry and revenues from its single biggest potential market? It’s very short-sighted and guaranteed to produce a consumer backlash, which there are already multiple, clear signs of.
During the financial crisis which peaked in 2008-2009, Hong Kong and China were the most fertile oasis on a worldwide basis for luxury brand companies. By contrast, Japanese and North American sales were generally down, and European sales were flat to down. China, Brazil and India were the bright spots, with China by far the brightest. In 2009, Versace gave up on the Japanese market after a run of some 30 years, closing up shop.
During the same year, leading luxury brand marketers reported sales revenue growth in China/Hong Kong in the range of 30%. Hong Kong retailers of luxury brand goods have traditionally enjoyed a competitive edge on pricing as compared with outlets within mainland cities.
A major constraint to growth in China among luxury brand companies, especially for those who depend on wholly-owned retail outlets, is the availability of suitable quality retail space in which to open new stores. Premises have to be in line with the quality and image of the brand, as do the locations, the neighborhood environment, etc.; and then the interior design, furnishing and fittings have to be in line as well.
Knowing how much attention companies in this sector pay to the quality of design and finishing of their retail stores, one would assume they would also pay close attention to the selection and training of their retail staff. My own experience suggests they may now be doing a better job of this in the Chinese mainland than in Hong Kong.
Here’s one recent example to illustrate my point. My wife purchased something in a store in Hong Kong’s Central District during the month of July. The shop, an outlet of a world-famous luxury brand (the English language brand name has five letters but does not begin with “Z”), is located in The Landmark, which is one of Hong Kong’s most prestigious, high-end retail malls. Like others in this category, a high percentage of its big-spending customers are mainlanders.
The sales lady was a young Hong Kong Chinese lady, probably in her late 20s or early 30s. While making casual conversation waiting for the purchased item to be altered on the spot, my wife mentioned she was leaving for Beijing the following day.
The salesperson said she had never been to Beijing. My wife suggested she really must make an effort to get there one of these days.
“Yes, I will” responded the high-end luxury brand sales person, continuing with “What’s the weather in Beijing now? Is it winter there now?”
Beijing’s record heat wave this summer has been an item of daily news coverage in Hong Kong, as you would expect.
If Hong Kong luxury brand retailers can’t find staff who know that Beijing is not in the same place as polar bears and penguins, they’d better expand the scope of their training programs to address this level of ignorance. Soon.
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