WEBVTT - China's New Austerity Worries Luxury Brands

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<v Speaker 1>You're listening to Asia Centric from Bloomberg Intelligence, the podcast

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<v Speaker 1>that pulls back the curtain non global business so you

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<v Speaker 1>can invest better across the Pacific rim. I'm Tom Corbett

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<v Speaker 1>in Hong Kong.

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<v Speaker 2>And I'm John Lee. China's economy resembles a high stakes

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<v Speaker 2>tug of war with fear and greed finding for the

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<v Speaker 2>hearts and minds of Chinese consumers.

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<v Speaker 1>Its property crisis, its stock market swings and following prices

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<v Speaker 1>have dealt a body blow to the confidence of its

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<v Speaker 1>once freewheeling consumers, and shock waves from the spending pullback

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<v Speaker 1>are shaking up some of the world's biggest luxury brands, Apple, Gucci.

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<v Speaker 2>And Tesla At some of the names feeling the pinch.

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<v Speaker 2>But is the new Chinese frugality here to stay or

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<v Speaker 2>will that big spending ways returned With avengeance.

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<v Speaker 1>Let's go deep on China's new consumer austerity with Catherine

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<v Speaker 1>Limb's senior cons humor analyst with Bloomberg Intelligence in Singapore.

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<v Speaker 2>And Debrah Aitken, senior Luxury Brands analyst with Lundberg Intelligence

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<v Speaker 2>in London.

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<v Speaker 1>Catherine and Deborah welcome both Asia Centric.

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<v Speaker 3>Hello, nice to be.

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<v Speaker 4>Here, Thanks for having us, Tom John Catherine.

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<v Speaker 2>How is China's economic words impacting confidence and their ability

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<v Speaker 2>to spend?

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<v Speaker 4>Well, we've actually seen the negative wealth effect weighing in

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<v Speaker 4>on spending for the first two months of twenty twenty four,

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<v Speaker 4>and notably this should have actually been two strong months

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<v Speaker 4>because of the lunar New Year's celebrations. Unfortunately, we continue

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<v Speaker 4>to see retail sales missing market estimates and we are

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<v Speaker 4>now expecting that there will be further downwards revisions to

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<v Speaker 4>market expectations for retail sales in China this year.

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<v Speaker 2>And on a previous podcast, we had how long Economists

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<v Speaker 2>that Grow Investments discuss how Chinese consumers are downgrading their

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<v Speaker 2>habits the foregoing overseas trips in favorite domestic travel. Are

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<v Speaker 2>we seeing these in terms of the numbers, Well, in.

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<v Speaker 4>Terms of the travel numbers itself, we are definitely seeing

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<v Speaker 4>more of them traveling domestically within mainland China, going for

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<v Speaker 4>shorter trips and specifically traveling within the region in Asia. Now,

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<v Speaker 4>there could have actually been flight constraints, capacity constraints, and

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<v Speaker 4>perhaps some of these safety concerns lingering post COVID, but

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<v Speaker 4>that said itself, we do see that even the travelers

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<v Speaker 4>are tightening their spending budgets as they go planning for

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<v Speaker 4>their travels.

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<v Speaker 1>Deborah Aiken in London. We've seen some amazing sales figures

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<v Speaker 1>for some of the luxury brands. Widely reported Gucci sales

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<v Speaker 1>down nearly twenty percent for the first quarter, Asia Pacific

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<v Speaker 1>leading the way. That's a report from Bloomberg News. We

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<v Speaker 1>watch exports to China down twenty five percent in February.

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<v Speaker 1>What's your take on all this? How long could it last?

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<v Speaker 1>These numbers are a far cry from the free wheeling

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<v Speaker 1>spending patterns of the past.

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<v Speaker 3>Hi, Tom, I think, well, several things here. So if

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<v Speaker 3>we look at what happened, particularly with Gucci, they're due

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<v Speaker 3>to have results come through and they guide for around

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<v Speaker 3>a twenty percent negative iss. You say on Gucci predominantly

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<v Speaker 3>linked to Asia and particularly China, but I feel you

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<v Speaker 3>know that that's quite standalone, or that there are a

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<v Speaker 3>couple of other brands Gucci, Berbery and Salvatore for Agamo.

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<v Speaker 3>They're all going through strategy overhaul, luxury brand elevation and

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<v Speaker 3>amidst new creative director change, so they're working with old

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<v Speaker 3>product versus new and maybe they're not really sponsoring enough

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<v Speaker 3>maybe they're not as active right now because there's not

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<v Speaker 3>much product around from the new design, and consumers, particularly wholesalers,

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<v Speaker 3>wholesale accounts, the boutiques, the department stores aren't willing to

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<v Speaker 3>take on board those types of products and take the

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<v Speaker 3>risk in the Chinese market in the downturn. But at

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<v Speaker 3>the other end, this first half of twenty twenty four

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<v Speaker 3>out of Asia faces particularly harsh comparables a year ago

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<v Speaker 3>on the sales numbers. You know, there was big growth

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<v Speaker 3>first half twenty twenty three after n twenty twenty two closures.

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<v Speaker 3>So we get companies with deep heritage, very high level,

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<v Speaker 3>high priced companies, brands like MS Brunello, Kushinelli and also

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<v Speaker 3>prior to doing very well, and those kinds of demand

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<v Speaker 3>levels are holding up. So it really is a mix,

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<v Speaker 3>you know, in terms of what we're seeing overall.

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<v Speaker 2>We recently spoke to Vincent Lamb, CEO of Gemini Private

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<v Speaker 2>Concierge Singapore based Services, which caters to the indulgences of

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<v Speaker 2>the rich. Many of Vincent's clients are from mainland China,

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<v Speaker 2>and we asked him how Chinese spending patterns have changed post.

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<v Speaker 5>COVID, the market change or our euy has changed a

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<v Speaker 5>little bit. We're not getting as many calls and queries

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<v Speaker 5>from China and we're getting a lot more calls from Singapore.

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<v Speaker 2>I don't think that coincidence.

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<v Speaker 5>I think there is definitely a shift in the market

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<v Speaker 5>on how Chinese people in China are spending and what

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<v Speaker 5>they're doing with their money.

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<v Speaker 3>Basically, if I.

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<v Speaker 5>Kick you back pre COVID, that's sort of twenty nineteen

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<v Speaker 5>and twenty eighteen times of period. The mainland Chinese is

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<v Speaker 5>very active in their luxury spending. You see complete excesses

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<v Speaker 5>in buying in jets and yachts, properties abroad, as well

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<v Speaker 5>as luxury travel and luxury spending. And then come COVID

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<v Speaker 5>two to zero. Obviously all those big ticket purchases dried up,

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<v Speaker 5>especially with jets and yachts just nowhere to go, nowhere

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<v Speaker 5>to part them. And then now we're in the post

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<v Speaker 5>COVID period, people are beginning to travel again. I'm seeing

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<v Speaker 5>a substantial drop in these sort of luxury items being

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<v Speaker 5>purchased abroad.

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<v Speaker 4>Now.

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<v Speaker 5>I think that's not a lifestyle issue. That could be

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<v Speaker 5>a currency issue and the florid exchange issue, where Chinese

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<v Speaker 5>people just couldn't get their money out or couldn't convert

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<v Speaker 5>into US dollars or euros, you know, to buy these

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<v Speaker 5>things because of the exchange control. So again I think

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<v Speaker 5>the government also tried to encourage you know, if you

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<v Speaker 5>have made a lot of money in China, you should

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<v Speaker 5>spend that money in China itself.

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<v Speaker 2>Debra, we just heard from Vincent about the shift in

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<v Speaker 2>Chinese spending patterns. In your view, which global brands could

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<v Speaker 2>be the most exposed to a potential slowdown in Chinese spending.

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<v Speaker 3>In terms of brands, we have a list on our

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<v Speaker 3>boards which shows some companies have up to forty percent

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<v Speaker 3>plus of their sales across the Asia area and brands

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<v Speaker 3>in particular on slowdown. So we saw Gucci. So it's

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<v Speaker 3>brands which aren't at the forefront of the consumer first off,

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<v Speaker 3>brands that are in transition. So the three that I named,

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<v Speaker 3>for example, Ferragamo has a large footprint in Asia, big

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<v Speaker 3>exposure to China. Birbury is building itself in China. Gucci

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<v Speaker 3>had a big market in China. So they are all

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<v Speaker 3>exposed and they're all struggling. If I look to the

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<v Speaker 3>lower end too, though in particular, perhaps the US brands

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<v Speaker 3>and how we're watching those quarter by quarter. So we

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<v Speaker 3>can think about names like Michael Kor's Steward Advisement Coach

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<v Speaker 3>Kate Spade, where they're builting their way within the Tapstreak

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<v Speaker 3>Capri combined deal which would take place this year, but

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<v Speaker 3>where those two companies in particular, and some of the

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<v Speaker 3>brands that they have at entry level are perhaps struggling

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<v Speaker 3>a little bit. And then also there are some other

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<v Speaker 3>brands and some other categories actually wear an LVMH, for example,

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<v Speaker 3>with its seventy five brands, one of the categories it's

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<v Speaker 3>built over the last several years has been perfume and

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<v Speaker 3>cosmetics within that area, and we think of that as

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<v Speaker 3>entry level into their brand portfolios. Then Lorel, for example,

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<v Speaker 3>with some of its high end brands biersed off with

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<v Speaker 3>La Prairie este l order. They've all ended up in

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<v Speaker 3>China being overexposed, some of them with more inventory in

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<v Speaker 3>Hainan and others, and that's only just starting to normalize.

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<v Speaker 3>So there for now and through the rest of twenty

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<v Speaker 3>four for me are the brands which will take time

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<v Speaker 3>to come back, and that it's a second half recovery

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<v Speaker 3>and we need to be watching them quarter by quarter.

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<v Speaker 2>Vincent also claimed that European luxury makers maybe getting worried

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<v Speaker 2>not only from weak cyclical demand, but also a growing

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<v Speaker 2>preference amongst Chinese consumers for local brands.

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<v Speaker 5>I think China trying to push that technology and craftsmanship.

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<v Speaker 5>For example, the iPhone versus Samsung and then the Huawei.

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<v Speaker 5>You know, you might think in the Western world iPhone

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<v Speaker 5>and Samsung has the majority of market, but in China,

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<v Speaker 5>China brands are very strong. You know, you sell me

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<v Speaker 5>and your Huawei. They have really top end models that

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<v Speaker 5>the pricing is not far from your iPhones and your Samsong,

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<v Speaker 5>and there's a very strong following. People generally opt for

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<v Speaker 5>the China products because a lot of them are very good.

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<v Speaker 5>The same as wine. You know, some of the China

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<v Speaker 5>wine can be hundreds of thousands of dollars. It's the same

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<v Speaker 5>level as your Opus one and your Cato Marco and

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<v Speaker 5>so on. And you look at cars, yes, you have

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<v Speaker 5>your Tesla, Mercedes and new cars, but China electric cars

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<v Speaker 5>are coming. I would expect in the next ten years

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<v Speaker 5>China will try to develop a bigger domestic luxury market

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<v Speaker 5>than the last ten years.

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<v Speaker 2>Catherine Vincent just mentioned that Chinese consumers are starting to

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<v Speaker 2>look at local brands. Do you think geopolitical tensions are

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<v Speaker 2>making Chinese consumers more nationalistic?

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<v Speaker 4>I think the drivers for Chinese consumers towards the national

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<v Speaker 4>brands started a couple of years ago. If we take

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<v Speaker 4>a step back, when the controversy over the usage of

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<v Speaker 4>Shinjiang cotton first occurred, and that impacted the lights of

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<v Speaker 4>Nike and Adidas, as well as fast retailings Unicloe. That

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<v Speaker 4>prompted the shift towards some of the local sports brands

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<v Speaker 4>like Anta and Leaning. And then with the rise of

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<v Speaker 4>the influence from social media itself, we've seen a shift

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<v Speaker 4>not just towards national sportswear, but also a shift towards

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<v Speaker 4>national brands in cosmetics as well. We've actually seen more

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<v Speaker 4>of the Chinese companies being able to better leaverage on

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<v Speaker 4>the rise of the social media influence, to be to

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<v Speaker 4>create and package their products. And I must say that

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<v Speaker 4>again their ability to package the value for money proposition,

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<v Speaker 4>along with some of the examples that I've seen that

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<v Speaker 4>they come from the same factory as the international brands, etc.

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<v Speaker 4>They are just as good, you know, with a fraction

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<v Speaker 4>of the price itself. Chinese shoppers are.

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<v Speaker 1>Buying in Deborah Aiken in London and Catherine Limb in Singapore.

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<v Speaker 1>Is it possible that this consumer retrenchment in China is overstated?

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<v Speaker 1>Could it be that this is just a matter of

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<v Speaker 1>the Chinese consumer having money but just not feeling rich

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<v Speaker 1>enough to spend it.

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<v Speaker 4>I think the negative wealthy fect is weighing on the

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<v Speaker 4>propensity to spend. As I've mentioned, there are categories out

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<v Speaker 4>there that select consumers are still willing to actually spend more,

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<v Speaker 4>not just on consumer goods itself. Tom recall that you

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<v Speaker 4>know we've actually seen some of the younger Chinese consumers

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<v Speaker 4>spending on services such as concerts, domestic travels, etc. So

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<v Speaker 4>I do think that once the overhang on the economy

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<v Speaker 4>the job securities gets more stable, you will see the

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<v Speaker 4>spending come through again, not in the same fashion as

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<v Speaker 4>we have seen before COVID, but there will be a

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<v Speaker 4>trajectory upwards in my view.

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<v Speaker 1>Debrah aken any thought on that.

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<v Speaker 3>Yeah, Actually, And if I bring it particularly to a

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<v Speaker 3>luxury perspective and give you a couple of numbers, we

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<v Speaker 3>so often hear China associated with the luxury market. The

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<v Speaker 3>Chinese consumer back in twenty nineteen made of thirty three

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<v Speaker 3>percent of personal luxury goods spending, and what we used

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<v Speaker 3>to find at the time was just over a quart

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<v Speaker 3>of that spend was on the mainland. The rest was elsewhere.

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<v Speaker 3>It was Hong Kong, it was Japan, Macau, Hainan, outside

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<v Speaker 3>of the main areas, and then also we would say

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<v Speaker 3>it was further afield. So the Europeans felt the consumer

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<v Speaker 3>protection of tourism in store, and that's what's missing still,

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<v Speaker 3>as did the US. But if we look at the

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<v Speaker 3>numbers overall, we actually see from twenty nineteen where we

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<v Speaker 3>say around a quarter of that spend was in China,

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<v Speaker 3>we actually now see that the Chinese mainland is sixteen

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<v Speaker 3>percent of spend of the market, So actually the Chinese

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<v Speaker 3>consumer is not spending as much globally, but they're spending

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<v Speaker 3>more in China.

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<v Speaker 2>There's been an interesting phenomenon in Hong Kong where we're

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<v Speaker 2>seeing a lot less mainland tourists enter Hong Kong, but

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<v Speaker 2>at the same time you're seeing a lot more Hong

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<v Speaker 2>Kong residents travel to Shenzhen and neighboring cities, leading to

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<v Speaker 2>some pundits calling Hong Kong the ghost town. During holidays

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<v Speaker 2>and weekends, Tom Ran into one of these Hong Kong

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<v Speaker 2>residents who's made we can travel to Shenzhend part of

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<v Speaker 2>his personal routine. Thirty three year old Hugo Lee says,

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<v Speaker 2>it just makes sense. Let's have a listen.

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<v Speaker 6>You go to Shenjen how on like at least like

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<v Speaker 6>two times in a month, and what's the draw? It

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<v Speaker 6>wasn't always this way, right. I feel like because I've

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<v Speaker 6>been living in Hong Kong for long enough and I

0:14:24.320 --> 0:14:26.280
<v Speaker 6>tried a lot of things in Hong Kong ready, so

0:14:26.360 --> 0:14:30.000
<v Speaker 6>then Sheenchin actually feels more refreshing to me. It's been

0:14:30.040 --> 0:14:32.480
<v Speaker 6>a big trend in Hong Kong where a lot of

0:14:32.520 --> 0:14:36.000
<v Speaker 6>hongkowners want to go to Chenchin over the weekend because

0:14:36.040 --> 0:14:40.440
<v Speaker 6>the food is much cheaper with better quality, and then

0:14:40.640 --> 0:14:41.800
<v Speaker 6>there are a lot of things that you can do

0:14:41.840 --> 0:14:43.720
<v Speaker 6>in Chenchen as well. There are a lot of big

0:14:43.760 --> 0:14:46.640
<v Speaker 6>shopping malls with different themes, and some of the shopping

0:14:46.720 --> 0:14:49.800
<v Speaker 6>malls even have like specific themes of like some games

0:14:49.840 --> 0:14:51.800
<v Speaker 6>that you can play in it. So I feel like

0:14:52.280 --> 0:14:55.560
<v Speaker 6>it's a good place to get relaxed. Is it more

0:14:55.640 --> 0:14:58.320
<v Speaker 6>for like older people younger people? A little bit of bout?

0:15:00.000 --> 0:15:04.040
<v Speaker 6>I think before the pandemic period. Maybe for the younger

0:15:04.080 --> 0:15:07.520
<v Speaker 6>generations we do go to Hingin from time to time,

0:15:07.680 --> 0:15:11.479
<v Speaker 6>but for now I think it's it's across all generations.

0:15:11.560 --> 0:15:16.360
<v Speaker 6>So consider the fact that let's say, for like one

0:15:16.400 --> 0:15:19.280
<v Speaker 6>hundred KD, like if you spend in Hong Kong, what

0:15:19.280 --> 0:15:22.480
<v Speaker 6>can you get in terms of food? Maybe the quality

0:15:22.720 --> 0:15:25.080
<v Speaker 6>and the service will not be good, right, But then

0:15:25.560 --> 0:15:29.680
<v Speaker 6>is engine you can enjoy much better quality of service

0:15:29.720 --> 0:15:32.600
<v Speaker 6>and food, So why not hu you get more for

0:15:32.680 --> 0:15:35.680
<v Speaker 6>your money in Ginin? Exactly? Is it all about money

0:15:35.800 --> 0:15:39.320
<v Speaker 6>or does it go beyond that? I think it's what

0:15:39.520 --> 0:15:43.000
<v Speaker 6>Money is definitely one of the factors that drive people

0:15:43.000 --> 0:15:45.240
<v Speaker 6>to go to Ginin a lot. The other thing is

0:15:45.280 --> 0:15:48.280
<v Speaker 6>like it's more spacious. Obviously, what do you see in

0:15:48.320 --> 0:15:51.040
<v Speaker 6>the future. Is this a permanent change? Is this a

0:15:51.120 --> 0:15:55.440
<v Speaker 6>temporary thing? This Jin popularity. To be honest, I don't

0:15:55.480 --> 0:15:57.440
<v Speaker 6>have a crystal ball. I can't tell how it's going

0:15:57.520 --> 0:15:59.240
<v Speaker 6>to be in the long term, but at least for

0:15:59.480 --> 0:16:02.000
<v Speaker 6>the short term medium term, I think that the trend's

0:16:02.040 --> 0:16:06.160
<v Speaker 6>going to proceed back ten years to the way it

0:16:06.320 --> 0:16:08.440
<v Speaker 6>used to be. People from Shenjin would come to Hong

0:16:08.560 --> 0:16:12.960
<v Speaker 6>Kong for weekends, for shopping for entertainment. Now the tables

0:16:12.960 --> 0:16:17.400
<v Speaker 6>have turned. Does that surprise you? I don't see it

0:16:17.400 --> 0:16:21.640
<v Speaker 6>as a surprise. I feel like back then, when a

0:16:21.680 --> 0:16:23.600
<v Speaker 6>lot of mainland Chinese people would like to come to

0:16:23.600 --> 0:16:26.520
<v Speaker 6>Hong Kong because they trust the quality, the products are real.

0:16:26.600 --> 0:16:29.280
<v Speaker 6>In Hong Kong, they can buy a lot of famous

0:16:29.320 --> 0:16:33.960
<v Speaker 6>brands with a cheaper price. But now they can actually

0:16:33.960 --> 0:16:37.000
<v Speaker 6>get the same sort of my price with the same

0:16:37.000 --> 0:16:38.680
<v Speaker 6>products in Jin.

0:16:39.040 --> 0:16:39.440
<v Speaker 2>Yeah.

0:16:40.200 --> 0:16:41.280
<v Speaker 4>I think the high speed.

0:16:41.120 --> 0:16:42.280
<v Speaker 6>Rail was a game changer.

0:16:42.360 --> 0:16:44.080
<v Speaker 1>Shinjen is more accessible now.

0:16:44.480 --> 0:16:45.520
<v Speaker 6>Yeah, yeah, definitely.

0:16:47.280 --> 0:16:50.880
<v Speaker 2>So that's a real life example of what motivates Hong

0:16:50.960 --> 0:16:54.920
<v Speaker 2>Kong is to travel to Shenzhen. Catherine, what's driving this

0:16:55.080 --> 0:16:58.400
<v Speaker 2>trend and what's the impact for Hong Kong retail?

0:17:00.080 --> 0:17:03.040
<v Speaker 4>Do you know what, John, Absolutely, the ties seems to

0:17:03.080 --> 0:17:07.760
<v Speaker 4>have turned for Hong Kong being the de facto shopping paradise.

0:17:08.280 --> 0:17:11.440
<v Speaker 4>It's going the other way now for the Hong Kong residents.

0:17:11.720 --> 0:17:15.399
<v Speaker 4>And part of that is because two things. Firstly, of course,

0:17:15.480 --> 0:17:19.240
<v Speaker 4>let's take into consideration of d Weeker yun. That has

0:17:19.280 --> 0:17:23.399
<v Speaker 4>made it more affordable for Hong Kong residents to actually

0:17:23.400 --> 0:17:27.960
<v Speaker 4>spend on basic goods in China. The underlying driver for

0:17:28.080 --> 0:17:31.040
<v Speaker 4>that is that in the last five years, if you

0:17:31.080 --> 0:17:36.520
<v Speaker 4>look at the quality of the offerings the merchandise array

0:17:36.600 --> 0:17:41.560
<v Speaker 4>that we have seen in China, particularly nearby Chinese cities

0:17:41.600 --> 0:17:45.119
<v Speaker 4>like Shanjin, we are looking at malls which are like

0:17:45.240 --> 0:17:48.639
<v Speaker 4>three or four times the size of that in Hong Kong.

0:17:49.160 --> 0:17:53.880
<v Speaker 4>The whole shopping experience has been elevated. I can totally

0:17:53.920 --> 0:17:57.520
<v Speaker 4>see why Hong Kong residents would want to go shopping

0:17:57.600 --> 0:18:01.159
<v Speaker 4>in Shinjin right now now, not with standing of course,

0:18:01.440 --> 0:18:05.480
<v Speaker 4>with the underlying demand from one point four billion population,

0:18:06.119 --> 0:18:09.440
<v Speaker 4>there is a lot more merchandise on the table to select,

0:18:09.840 --> 0:18:14.119
<v Speaker 4>and Hong Kong residents are also now more open towards

0:18:14.280 --> 0:18:18.280
<v Speaker 4>some of these Chinese merchandise, particularly when it comes to

0:18:18.320 --> 0:18:23.480
<v Speaker 4>the basic goods, namely electronics, whether it's Sumi or even

0:18:23.560 --> 0:18:27.359
<v Speaker 4>Huawei or Pu, some of the Chinese brands and the

0:18:27.400 --> 0:18:32.399
<v Speaker 4>local household care products. Hong Kong residents are willing to

0:18:32.480 --> 0:18:34.720
<v Speaker 4>actually spend on these items now.

0:18:34.680 --> 0:18:37.280
<v Speaker 2>And some of the numbers coming out staggering. I read

0:18:37.320 --> 0:18:41.440
<v Speaker 2>that during the Easter period, mainland tourists into Hong Kong

0:18:41.560 --> 0:18:45.680
<v Speaker 2>was something like forty five percent below pre COVID levels

0:18:45.920 --> 0:18:48.879
<v Speaker 2>on the other hand, I think Hong Kong residents going

0:18:49.000 --> 0:18:53.000
<v Speaker 2>overseas and in particular to mainland China was up ten percent.

0:18:53.440 --> 0:18:55.200
<v Speaker 2>Is Hong Kong retailer getting worried.

0:18:57.320 --> 0:18:59.520
<v Speaker 4>Well, I think we will start to actually see the

0:18:59.600 --> 0:19:02.840
<v Speaker 4>numbers coming through. I would say that speaking to some

0:19:02.880 --> 0:19:06.919
<v Speaker 4>of my contexts to things one, they definitely think that

0:19:07.240 --> 0:19:10.680
<v Speaker 4>there is very limited room for landlords to actually increase

0:19:10.840 --> 0:19:13.800
<v Speaker 4>shop rentals, which is a good news for them. Now.

0:19:13.840 --> 0:19:16.199
<v Speaker 4>On the sales fronts, we actually look at some of

0:19:16.200 --> 0:19:20.919
<v Speaker 4>the companies here in Hong Kong, most have diversified or

0:19:20.960 --> 0:19:25.399
<v Speaker 4>set up operations in China, so the incremental impact to

0:19:25.480 --> 0:19:30.360
<v Speaker 4>them from lower sales in Hong Kong will be marginally

0:19:30.440 --> 0:19:33.800
<v Speaker 4>less significant than what it was before. What they are

0:19:33.840 --> 0:19:37.120
<v Speaker 4>focusing on right now is to actually adjust the merchandise

0:19:37.280 --> 0:19:40.600
<v Speaker 4>mix so that in the case of jewelry, for instance,

0:19:41.040 --> 0:19:46.000
<v Speaker 4>they will have the pricier items here dedicated exclusive to

0:19:46.359 --> 0:19:50.000
<v Speaker 4>the Hong Kong market only that differentiates them from what

0:19:50.440 --> 0:19:54.680
<v Speaker 4>is available for mainland China. So they are making adjustments,

0:19:54.920 --> 0:19:58.280
<v Speaker 4>you know, what they are offering to the consumers with

0:19:58.640 --> 0:20:02.800
<v Speaker 4>bearing in mind that they are probably facing consumers with

0:20:02.920 --> 0:20:05.080
<v Speaker 4>shifting needs as we speak.

0:20:05.640 --> 0:20:09.600
<v Speaker 1>And Catherine, is your impression that this shift we have

0:20:09.720 --> 0:20:14.080
<v Speaker 1>seen between Hong Kong and shen Zen as a retail destination,

0:20:14.800 --> 0:20:18.840
<v Speaker 1>is this the future? Is this a structural shift or

0:20:19.280 --> 0:20:21.760
<v Speaker 1>do you see it as something temporary and fleeting that

0:20:21.840 --> 0:20:24.119
<v Speaker 1>perhaps currency shifts could up end.

0:20:25.920 --> 0:20:30.120
<v Speaker 4>I think structurally. We don't have the actual numbers, clearly,

0:20:30.160 --> 0:20:34.280
<v Speaker 4>the authorities have not released these two publicly. But if

0:20:34.280 --> 0:20:37.040
<v Speaker 4>you look at the mix of the population in Hong Kong,

0:20:37.359 --> 0:20:41.040
<v Speaker 4>I would say that because of the multiple talent schemes

0:20:41.480 --> 0:20:45.639
<v Speaker 4>whereby they have attracted mainland Chinese to be residents in

0:20:45.640 --> 0:20:49.640
<v Speaker 4>the city, the composition of mainland Chinese within the Hong

0:20:49.720 --> 0:20:55.560
<v Speaker 4>Kong population has actually increased tremendously versus pre COVID levels.

0:20:56.119 --> 0:20:59.800
<v Speaker 4>So there is hence a natural inclination for them to

0:21:00.040 --> 0:21:04.080
<v Speaker 4>also shift back to China for their purchasers, whether it

0:21:04.160 --> 0:21:06.879
<v Speaker 4>is for basic goods or maybe for something a little

0:21:06.880 --> 0:21:10.800
<v Speaker 4>on the higher and or even for services, whether it's petticure,

0:21:11.000 --> 0:21:14.919
<v Speaker 4>you know, medicure or hair washers. But that's what is

0:21:15.040 --> 0:21:18.920
<v Speaker 4>driving the trend over the borders into Shenjin and the

0:21:18.960 --> 0:21:20.240
<v Speaker 4>neighboring Chinese cities.

0:21:20.600 --> 0:21:22.719
<v Speaker 2>And Catherine, for the listeners who are not based in

0:21:22.760 --> 0:21:25.800
<v Speaker 2>Hong Kong. Can you give some type of examples of

0:21:25.880 --> 0:21:29.560
<v Speaker 2>how much cheaper it is to buy certain items over

0:21:29.560 --> 0:21:32.120
<v Speaker 2>the border in Shenzhen versus buying it in Hong Kong.

0:21:34.480 --> 0:21:37.399
<v Speaker 4>I'll take Bubble Tea and clearly you know there is

0:21:37.440 --> 0:21:40.680
<v Speaker 4>a Bubble Tea craze in Asia, and I'm sure maybe

0:21:40.680 --> 0:21:43.000
<v Speaker 4>Debra will add to that that there is that crazy

0:21:43.040 --> 0:21:46.840
<v Speaker 4>in London too. So Bubble Tea, for instance, you are

0:21:46.880 --> 0:21:50.920
<v Speaker 4>probably getting at least double the selection in chin Jen

0:21:51.040 --> 0:21:55.719
<v Speaker 4>and suggestion gen alone right, double the selection at about

0:21:55.760 --> 0:21:58.800
<v Speaker 4>thirty percent cheaper than what you get in Hong Kong

0:21:59.400 --> 0:22:03.160
<v Speaker 4>if you are in a position to actually download discount

0:22:03.240 --> 0:22:07.520
<v Speaker 4>vouchers on your apps in China, and clearly lots of

0:22:07.600 --> 0:22:11.440
<v Speaker 4>the Bubble Tea shops now have apps they're offering instore

0:22:11.520 --> 0:22:16.280
<v Speaker 4>discount coupons thanks to platforms like mit one as well

0:22:16.320 --> 0:22:21.080
<v Speaker 4>as Ali Baba's Alama, etc. With the right discounts and

0:22:21.320 --> 0:22:28.359
<v Speaker 4>means three percent cheaper will be the basic items in China.

0:22:28.440 --> 0:22:32.960
<v Speaker 1>Our guests have been Catherine Limb's senior consumer analyst with

0:22:33.040 --> 0:22:39.119
<v Speaker 1>Bloomberg Intelligence in Singapore, and Debra Aitken, Senior Luxury goods

0:22:39.160 --> 0:22:43.720
<v Speaker 1>analyst with Bloomberg Intelligence in London. It's been a fascinating

0:22:43.800 --> 0:22:48.879
<v Speaker 1>and insightful discussion about shine Up, consumer spending, luxury goods,

0:22:49.240 --> 0:22:53.880
<v Speaker 1>Hong Kong's new retail competition, and the road ahead. It's

0:22:53.880 --> 0:22:56.800
<v Speaker 1>been our pleasure having you both as our guests.

0:22:57.119 --> 0:22:59.880
<v Speaker 3>Thanks Top, Thanks John, thanks for having us.

0:23:01.000 --> 0:23:04.360
<v Speaker 1>I'm Tom Corbett in Hong Kong and I'm John Lee.

0:23:04.680 --> 0:23:07.640
<v Speaker 2>This podcast was produced by Clara Chan and you've been

0:23:07.680 --> 0:23:09.919
<v Speaker 2>listening to the Asia Centric podcast