Asia Watch

RETAIL THERAPY?: Hong Kong’s struggling retailers are waging war against the economic effects of SARS. Since the onset of the epidemic, retail sales have fallen up to 50 percent. Now the city’s merchants are beginning to offer unusual...

RETAIL THERAPY?: Hong Kong’s struggling retailers are waging war against the economic effects of SARS. Since the onset of the epidemic, retail sales have fallen up to 50 percent. Now the city’s merchants are beginning to offer unusual incentives to attract customers. For example, Li & Fung’s retail unit, Toys ‘R’ Us Hong Kong, is now selling its educational toys online to help parents whose children are stuck at home — and offering free delivery. Esprit Holdings, which has 40 stores in the city, has joined with Standard Charter Bank to offer a special deal to customers: buy one item with a Standard Charter credit card and get a second for about $1.30.

This story first appeared in the April 22, 2003 issue of WWD.  Subscribe Today.

Similarly, department stores are offering large discounts and incentives to their customers. More than 350 consignees at Sogo have begun a seven-day campaign that offers discounts up to 50 percent; part of the profits will be donated to the Hospital Authority to help protect frontline medical staff. Mitsukoshi held a four-day promotion over Easter offering 40 percent discounts. Upscale shopping mall Times Square saw its traffic rebound 90 percent when it offered such incentives as free three-hour parking.

Other retailers are turning lemons into lemonade, too. Jewelry maker Hang Fung Gold Technology is redecorating its showrooms during the downturn, and fashion chain store Theme is trimming some Hong Kong overhead. Theme may close three of its six Hong Kong outlets after it reported losses of $3.5 million for the last 15 months. Theme’s parent company, High Fashion International, which owns 70 percent of the chain, said that it will instead concentrate on expansion into China. Opening 40 more Theme franchises over the next four months will bring the total to 96 on the mainland. — Constance Haisma-Kwok

THE SAINT COMES MARCHING: St. John will open its first flagship in Japan on the Ginza West Fifth Avenue in Tokyo in late August. The 1,900-square-foot, two-story shop will carry all the brand’s collections, including its knit line, sports line, costume jewelry, bags, shoes and home gifts. St. John established its Japanese subsidiary in April 2002 and expects to generate sales of $16.7 million by the end of the current fiscal year. — Koji Hirano

GROWING, GROWING, GROWN: China’s first-quarter growth came in at 9.9 percent, the fastest quarterly growth since the Asian economic crisis in 1997. The Ministry of Commerce also reported that industrial output rose 17.2 percent and foreign direct investment rose 57 percent to $13.1 billion. Huang Yip, Smith Barney Hong Kong’s China economist, commented that the dramatic growth could be attributed to a number of factors, including “rising oil imports in face of the U.S.-Iraq war. Also, many manufacturers worked hard to deliver on orders before the war began.” Analysts expect second-quarter figures to be less robust, due mostly to the affects of the SARS outbreak.

In related news, Xinhua, China’s official news arm, reported that the mainland’s garment manufacturers made almost four items of clothing per person on earth last year. The national garment association said that more than 20 billion garments were produced in China last year. The sales of $48.3 billion represented 12 percent of the country’s total export figure. — C.H.K.

THE SHIPPING NEWS: Tourism and luxury goods aren’t the only things being hit by the outbreak of SARS in the Far East. The cancellation of flights to and from Hong Kong is having a major impact on airfreight. Since the outbreak, Cathay Pacific Airways has cut about 42 percent of its flights and has said it might consider grounding its entire fleet if the situation does not improve soon. And since more than 50 percent of export cargo is transported via passenger planes, disruptions are already occurring. Victor Mok, chairman of the Hong Kong Association of Freight Forwarding and Logistics, is appealing to the government and airlines “to work with Hong Kong’s freight and logistics industry to find a solution to the problem.” He said that manufacturers in the Pearl River Delta might have to look elsewhere to meet their capacity needs.

Also in Hong Kong, the Kwai Chung port reported double-digit growth in cargo throughput the first quarter. The rise was attributed mainly to robust exports from mainland China. Economists predict that the growth will not be sustained, however, because the SARS outbreak has resulted in the cancellation of business trips and trade fairs in the region.

Similarly, China’s three northern ports — Qingdao, Tianjin and Dalian — are planning to expand their handling capacity in the near term. The three ports reported a combined throughput of more than two million cargo containers. Qingdao, northern China’s busiest port, had a 32 percent growth rate in the first quarter. There are plans to add eight berths there by 2005. Dalian is adding six berths and Tianjin will add four.

In the meantime, Grand Alliance, one of the world’s largest shipping groups, is set to start a China-Europe service in the coming months. The South China Morning Post reported that eight ships providing almost 150,000 cargo containers of increased annualized capacity are being lined up for the service. The group already has five direct services between Asia and north Europe and two between Asia and the Mediterranean. The Grand Alliance is comprised of Hong Kong’s Orient Overseas Container Line, Japan’s NYK, Europe’s Hapag-Lloyd and P&O Nedlloyd, and Malaysia International Shipping. — C.H.K.

THE WORLD’S FACTORY: Komatsu Seiren Co., a major textile finisher, is establishing a joint-venture company in China for high processing of polyester and nylon fabrics, with operations expected to start in May next year. A Komatsu spokesman said the company has a 51 percent stake in Komatsu Seiren (Suzhou) Textile & Dyeing Co. capitalized at 29.5 million. Other shareholders include Mitsubishi Corp., Marubeni Corp., Toray Industries Inc. and Kuraray Co. Some $26.7 million will be invested in the projected plant to be located in Suzhou, Jiangsu Province, which will be capable of dyeing and coating 24 million linear yards of woven and knit fabrics annually, according to Komatsu.

Production will be promoted initially to the Chinese market for sports casualwear, curtains and other home furnishings and knitwear, Komatsu said. China is rapidly growing not only as a formidable supplier to the world market but also as a huge consumer market, Komatsu said in explaining the motivation for moving into China for production. — Tsukasa Furukawa

SHANGHAI NIGHTS: Nightlife in Shanghai is set to get a big boost with the opening of Three on the Bund, an entertainment complex sited in an historic building on the Huangpu River. The building will be the first Chinese project for renowned architect Michael Graves, who is leading the design team. The “contemporary fine-living’ concept is slated for a grand opening in October, but Shanghai society got a glimpse of what’s to come when two charity events were held last weekend. The star attraction was none other than chef Nobuyuki Matsuhisa, who prepared meals for 200 guests, including many of China’s biggest stars: actor Lu Yi, actress Zhang Yu, singer Ding Zi Jun and model Wong Hai Zhen. Matsuhisa’s 150-seat restaurant, Nobu, will open on the sixth floor of Three on the Bund in the fall. Four floors of Three on the Bund will be dedicated to fine dining. Celebrity chef Jean Georges Vongerichten will open Jean Georges; David Laris (former executive chef of Mezzo in London) will preside over Laris, and Jereme Leung (a master of Shanghainese cuisine) will be in charge of the Whampoa Club.

The seven-story building will also be home to an Evian Spa, the first Bernardaud Café outside Paris, fashion boutiques, an art gallery and a jazz lounge. Alan Chan, one of Asia’s most influential designers, is directing the project’s corporate identity initiatives as well as working on the spa and the Whampoa Club.

Three on the Bund is the brainchild of chief executive officer Handel Lee, who could barely contain his excitement during the Nobu weekend. “We’re combining the best things in life to create an innovative, elegant environment appealing to Shanghai’s sophisticated residents and international visitors,” he said. “This preliminary Nobu event is just the first step in realizing our vision.” — C.H.K.

MISSING THE TRAIN: The Macau government has put aside plans to build its first railway line, dealing a blow to Hong Kong’s Mass Transit Railway Corporation, which hoped to build the system. Citing an uncertain economic outlook, Macau’s secretary for transport and public works, Ao Man-long, declined to say how much the government would have spent on the project. But he did say that the MTRC’s proposal for a 17-kilometer elevated rail system would have cost between $337.6 million and $375.2 million. The first phase of the project would have been completed by 2006. The rail would have served entertainment complexes and transport centers, including the proposed Zhuhai-Macau-Hong Kong bridge. Although this railway plan has been shelved, Macau is still investigating ways to integrate its transport system with others in the Pearl River Delta. — C.H.K.

STILL FALLING: Department store sales in Tokyo slipped 5.3 percent in March from a year earlier to $1.49 billion, representing the sixteenth consecutive month of decline. The size of the fall in sales in Tokyo covering 28 stores run by 13 department store companies followed a 2.5 percent year-on-year drop in the previous month, according to the Japan Department Stores Association. Cold and bad weather during March, which adversely affected sales of spring clothes, as well as poor sales to corporations because of the continuing business recession, were chiefly blamed for the poor showing. Sales of clothing, the largest merchandise category, which accounted for nearly 40 percent of total sales, fell 5.8 percent to $509.2 million. Women’s wear sales were down 6.7 percent at $382.5 million, while men’s wear sales lost 4.5 percent at $109 million. — T.F.

IT’S A SMALL WORLD: Louis Vuitton Japan held an exhibition of the architecture of the brand’s shops worldwide April 5-17, with miniatures of the stores displayed in the LV Hall in its Omotesando shop in Tokyo. Domestic architects including Jun Aoki, who designed the brand’s Omotesando shop, as well as Kumiko Inui, architect for the shop in Kochi City, got together at the venue along with David McNulty and Eric Carlson, co-directors of Vuitton’s architecture department. On April 12, a symposium, “Architecture and Fashion,” was held at the Tokyo International Forum in Marunouchi. — K.H.

BATTER UP: In response to the growing popularity of Major League Baseball among Japanese baseball fans, with an increasing number of Japanese players performing in the U.S., Sumitomo Corp., official licensee in Japan for importing and marketing MLB branded merchandise, is set to further promote and expand sales of American goods in Japan. Sumitomo has opened a shop in Tokyo’s Shinjuku district, in addition to a number of MLB shops it operates in baseball stadiums and domes throughout Japan, including a directly operated shop in Sagami Ono in the suburb of Tokyo. The new outlet, located on the sixth floor of Stadium ALTA in Shinjuku, will sell replica style “Authentic Collection” and “Coopers Town Collection,” among others. Sumitomo said it previously targeted sales of MLB goods at “core” fans in Japan, but has decided to expand its scope to the increasing number of new fans who are attracted to MLB games and also to those Japanese consumers who are adopting sports clothes as fashion looks.
— T.F.