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Chinese Tourists Seen Driving Luxury

A new HSBC report explores the growing impact of traveling Chinese luxury retail shoppers in Hong Kong, South Korea, Taiwan, Singapore and Macau.

BEIJING — Chinese tourists, who have rapidly changing and increasingly sophisticated tastes, already dominate several key Asian retail markets, and their influence is apt to grow, according to a new report on luxury consumption from HSBC.

The bank’s analysis, laid out in the report “The Bling Dynasty,” explores the growing impact of traveling Chinese luxury retail shoppers in five markets: Hong Kong, South Korea, Taiwan, Singapore and Macau. HSBC estimates that Chinese citizens will make 88 million outbound trips this year and 155 million by 2020.

While HSBC notes that traveling Chinese luxury consumers already make a major impact on these markets, their influence will continue to rise, pushing brands to cater to their tastes. Mainland Chinese shoppers account for a varying share of luxury buying across the five markets, from 15 percent in Taiwan to 75 percent in Macau.

“With Chinese travelers having an impact on several local Asian markets, brands and retail operators need to adapt quickly. This is changing the luxury retail landscape of certain cities,” the report stated. “Prices and currencies matter as Chinese consumers are increasingly traveled and demanding. In turn, differentiated concepts are costly but necessary for the brands to stand out in a crowded space.”

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The five markets vary widely across a range of issues, and each needs to change and adapt in different ways to match the demands of Chinese luxury consumers, according to the report. While traveling to South Korea, for example, Chinese consumers are likely to prefer to shop for Korean brands over others.

“Chinese nationals will likely be under the influence of Korean trends. For imported brands, growth won’t come without a fight,” the report said.

Singapore faces an overcapacity issue in luxury retail, while Hong Kong is poised to continue as a prime destination for mainland retail shoppers. Prospects for the market in Taiwan are a bit less certain, but Macau has proven a surprisingly strong venue, primarily because of its allure to wealthy gamblers and holidaymakers.

As to specifics, the report offers a detailed analysis of luxury brands’ strength in the growing market of Chinese tourists. What matters now is how brands distinguish themselves in an increasingly crowded field of companies trying to capture that market, according to HSBC.

“‘Ubiquity’ remains a key concern as brands hit the paradox of trying to sell more of what should theoretically be exclusive,” the bank said.

HSBC said its top stock picks are PPR (now Kering), Hugo Boss, Coach and Prada. It also recommends Tiffany & Co., Tod’s and Hengdeli.

“Although we do not see much downside risk, we would nonetheless not advise buying other stocks in the space at this stage,” the report said.