By  on December 5, 2005

HONG KONG — Look out New York. Watch your back Tokyo.

This booming metropolis — and preeminent gateway to fast-growing China — has become the hottest international retail capital as fashion and luxury goods players build massive, glittering flagships here at a staggering pace.

A major Chanel boutique opens in the Prince's Building today, followed by another by Louis Vuitton — with Marc Jacobs hosting the festivities — on Thursday at the Landmark. Meanwhile, Gucci, Chloé, Jean Paul Gaultier and Miu Miu are other European brands plotting significant openings here in 2006, while Dior, Tod's and Ferragamo are among firms unveiling larger locations next year.

Brands increasingly view Hong Kong as a key communications platform, too, and are upping investments. To wit: Prada plans to restage its hit spring 2006 fashion show here early next year and Giorgio Armani plans to do an encore showing of his Privé collection after Paris couture week in January for a select group of Hong Kong clients on March 30.

"For a major brand, outside their primary market, Hong Kong should be their No. 1 choice [for a flagship]," said Bonnie Brooks, president of fast-growing Lane Crawford Joyce Group. "The customer is as international now as any major city in the world."

"Hong Kong now, it's like New York. It's at the top level of capitals," agreed Sidney Toledano, president of Dior, which operates nine boutiques in Hong Kong and will unveil next year an expanded 11,000-square-foot flagship on Peking Road, complete with Hong Kong's first Dior Homme boutique. "It's always been about high energy," he said of the city. "It's just a matter of finding the space."

Never mind prime retail rents that now rival stretches of Madison Avenue, ranging from $560 up to $1,200 per square foot, converted from Hong Kong dollars at current exchange. Investments here in the architecture and design of new outlets are at the same level as any flagship in Paris, Milan, Tokyo or London.

Fast-growing Chloé, for example, which has a single London flagship, will soon have a pair in Hong Kong: a two-floor unit in the Mandarin Oriental opens in August, while its original location at Pacific Place will double in size in October. Both will be christened with a large-scale event in the fall, and the brand is eyeing the city's Kowloon side in China for still another boutique at a later date."Hong Kong is another New York for me — and things go even faster," said Chloé chairman and chief executive officer Ralph Toledano. "If you want to have an influence on the Chinese market, you have to be very strong in Hong Kong."

Hong Kong has long been a shopping mecca, but what has changed is the scale. An outlet with low ceilings in a hotel just doesn't cut it anymore. Investments are at A levels, and the flagships here often dwarf in size, and certainly in number, locations in other major capitals.

"The scale of stores has started to increase," said Mark Lee, ceo of Gucci, which next fall plans to christen an 11,000-square-foot flagship with a four-story facade in the Landmark. It will be one of the first units in the world to showcase the brand's new store concept by architect Bill Sofield.

Robust business justifies what Lee described as a "significant" investment in building what he hopes will be the most luxurious store on the island. In the third quarter, Gucci's sales in Asia rocketed 27 percent, led by its nine stores in Hong Kong. "I'm very bullish," Lee said when asked about his outlook for 2006. "The local Hong Kong economy is very strong. Our business is driven first by local business, but we're getting an extra push from the tourists coming from Mainland China."

Thanks to eased visa restrictions, an estimated 60,000 mainlanders now cross the border into Hong Kong every day, and attractions such as a new Disneyland and the massive casino complexes under construction in nearby Macau are also fueling business and tourism, executives agreed. That the WTO meeting to continue the Doha round of trade talks is being held here next week is also viewed as an indication of global confidence in the region.

"The market is on a high," said Brooks of Lane Crawford, noting that her group in the past year has opened freestanding stores in Hong Kong for Balenciaga, Marni, Jil Sander, Dsquared, Marc Jacobs, Hugo Boss and Etro — not to mention a major flagship for Lane Crawford in the International Finance Center and an overhaul of its Pacific Place branch, unveiled last month."The amount of commerce going on in China is staggering and that's fueling a lot of the business in Hong Kong," Brooks said.

Indeed, such is the focus on the emerging Chinese market, with Hong Kong still the principal launching pad, that Brooks said she meets her key brand partners more on her home turf than in Europe.

Brooks cited double-digit increases for all of the group's businesses this year, with the fastest growth coming from shoes, accessories, cosmetics, contemporary sportswear and international designers. Among openings planned for 2006 are shops for Club Monaco, Emilio Pucci, Asprey and Garrard.

With more than seven million people packed into an area smaller than Manhattan, and little to do in terms of outdoor leisure, shopping is a primary pastime. And executives agreed Hong Kong customers are among the most fashion-driven in the world, with an especially keen appetite for looks directly from the runways of Paris and Milan.

"Runway works better in Hong Kong than most other Asian cities," said Michael Burke, ceo of Fendi, which is posting 80 percent growth in the former British colony. "They want the newest trends, they want service, and it has to be lightning speed. The local Hong Kong customer darts in and out of stores very fast. And they'll shop you every day."

Burke said a vibrant social scene, with a pileup of black-tie affairs nightly, also helps drive sales of fashions in Fendi's six stores.

"I found Hong Kong incredible. It is so vibrant, you really feel like you're at the center of the universe," said Diane von Furstenberg, who recently visited to check out her new 1,000-square-foot freestanding store here at the Landmark, operated by her business partners, Globalluxe Ltd.

David Ting, Globalluxe's president and ceo, said the DVF store is already performing above plan, and he has begun searching for a second location to open late next year or early in 2007. "We'll definitely open one or two more at least," he said. Wholesale business is not as important in Hong Kong, which puts the accent on freestanding stores, he noted.

That Armani is bringing his couture collection to Hong Kong speaks to the preeminence of the market, where the Italian designer boasts a massive superstore, known as Armani/Chater House, that rivals his Milan complex."In some ways, it's even more representative than Via Manzoni," said Robert Triefus, Armani's executive vice president of worldwide communications, rattling off such store features as flower and book shops, and a cosmetics department. Just last week, Armani added two freestanding shops to the complex — one for accessories, the other for chocolate. Triefus noted the firm — which already counts some 24 freestanding boutiques and shop-in-shops in Hong Kong — plans to further expand its presence next year with stores for its A|X Armani Exchange, Armani Jeans and Collezioni ranges.

"Hong Kong is still a destination for traveling Chinese because the prices in Hong Kong are about 20 percent lower than Mainland China," Triefus said, describing "dramatic" growth of 38 percent at Armani in the first six months of the current financial year in greater China.

Hellen Willerton, brand director for Chloé in the Asia Pacific, said the keys to success in Hong Kong are a strong brand image and positioning, which is why the company tripled its advertising spend there and also upped investments in staffing and training to ensure a world-class shopping experience. Still, flagships, she stressed, remain a key tool for broadcasting a brand to fast-growing China.

This explains the flurry of increasingly sophisticated boutiques, boasting everything from martini and CD bars to displays of commissioned art works, which is the case at the new Chanel temple.

"One-upmanship is very alive in Hong Kong," quipped Fendi's Burke. "When one company upgrades, everyone upgrades."

"Hong Kong is indeed becoming an important international showcase for luxury brands," said a spokesman for Prada, which operates its largest Asian store, after Japan, in Alexandra House. "Hong Kong is considered a shopping capital for people from all over Asia."

Given Hong Kong's volatile history — hit by the SARS health scare in 2003, and the Asian economic crisis in 1997 and 1998 — executives acknowledge the risk of yet another upset should an external catastrophe, say avian flu, arrive. But they stress that Hong Kong's resiliency to crisis borders on elasticity, aided by everything from short-term leases to rapid construction abilities.

"Every time there's a down market, it's an opportunity for big brands to get more space," said Burke. "And each time [Hong Kong] comes back, it's even stronger. Now the stores are as big or bigger than anything happening in New York or London."

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