UK's Topshop aims for Chinese shoppers as it opens first outlet in high-rent Hong Kong

HONG KONG – British fashion chain Topshop opened its first Hong Kong outlet on Thursday, becoming the latest Western brand to brave the city’s astronomical rents in a bid to crack the lucrative China market.

Topshop boss Philip Green cut the ribbon to the 1,300-square-meter (14,000-square-foot) shop with the help of Taiwanese actress Gwei Lun-mei.

Green said he wants to use the store, located in the city’s central business district, as a “stepping stone” to mainland China. He’s looking for possible locations in Beijing and Shanghai to open “flagship” stores.

Other foreign retailers that have launched recently in the Asian finance centre include U.S. brands Abercrombie & Fitch, Tommy Bahama, Forever 21 and Victoria’s Secret.

Foreign brands have been lining up to open showcase boutiques in Hong Kong as they try to get a share of the spending by the increasingly affluent consumers visiting from mainland China, the world’s second biggest economy. The demand has helped drive up shop rents in Hong Kong, a former British colony that’s now a special administrative region of China.

Hong Kong is a popular shopping destination for mainland Chinese because of low taxes and a reputation for authentic goods.

Green would not say how much the company, which already has stores in other Asian countries including Japan, Indonesia and Thailand, is paying for its new location, previously occupied by a Chinese-state owned chain selling arts and crafts and jade jewelry. He said the company had spent years looking.

“It’s been hard as most retailers will tell you, finding the right location in Hong Kong, at a sort of sensible price. It’s very, very tough. So this just came up, and fortunately we were able to put it together very quickly,” he said.

Prime retail space cost $4,328 per square foot a month in the first three months of 2013, making it the world’s priciest, according to commercial real estate firm CBRE. It said that was nearly 50 per cent higher than New York and about four times as much as Paris or London.

Topshop is working with local department store Lane Crawford to operate the new boutique.

Green said that he’s starting his search for mainland locations this week, with Chinese real estate agents visiting him while he’s in Hong Kong.

“I’d like to have a flagship in Beijing and a flagship in Shanghai,” Green said a day before the store opening. “If we can find 2,000 to 3,000 square meters — we’d like to have a Topman as well — if we can find 2 locations, off we go.”

Green said he’d also consider mainland locations outside of the two main cities as well as opening up another Hong Kong store.

Foreign brands prefer to test out the waters in Hong Kong, on the southern coast of China, before taking the plunge into the mainland. The city is an ideal testing ground, with nearly three-quarters of the 49 million visitors received last year coming from mainland China. Their spending helped push up retail sales by 10 per cent.

Tom Gaffney, head of retail at real estate at consulting firm Jones Lang LaSalle, said foreign retailers in Hong Kong benefit by getting brand recognition and customer loyalty from mainland shoppers.

But he said that rentals, which his firm forecasts will rise 5-10 per cent this year, are “something that a lot of the brands are looking at more carefully.” They’re becoming “quite cautious about taking core locations,” he said.

Swedish fashion retailer H&M is one high-profile victim of Hong Kong’s high rents. The company reportedly couldn’t agree on a lease renewal for its flagship store across the street from Topshop’s new outlet and will move out in the fall.


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