In Sectors

Luxury brands set foot into food and beverages in Asia-pacific

Luxury brands are expanding beyond their core fashion businesses into the food and beverages (F&B) sector, transitioning their brand from being totally fashion-oriented to more lifestyle-driven, according to a new report of CBRE – The Future of Luxury Retail in Asia Pacific: New Demand Drivers and Shifting Occupier Requirements.

"Including an F&B component in stores enables luxury retailers to provide their consumers with a more complete experience in which they can shop, relax and socialize," the report says.

That’s one of the three emerging trends in most Asia-Pacific markets identified by the property consultancy.

According to the report, the Asia-Pacific region accounted for one-third of personal luxury good sales globally in 2014. China and Hong Kong are two of the most penetrated luxury retail markets in the region, at 89 percent and 81 percent respectively. However, following several years of rapid expansion, these markets are approaching saturation point.

While Asia-pacific is experiencing a slowdown in the luxury retail sector, some emerging trends are set to provide a new stimulus for demand in the coming years. Especially in Hong Kong, sluggish luxury sales have resulted in a substantial decline in prime rents, and luxury retailers are under pressure to review their business strategies. Some brands are now considering alternative approaches such as affordable luxury and F&B in response.
The emergence of luxury childrenswear brands and affordable Luxury are the other two emerging trends in the region revealed by CBRE.

"Affordable luxury retailers provide high quality branded goods at a lower price tag than top-tier luxury retailers. Several top-tier luxury brands are already so well established in the region that they are at risk of overexposure, a trend which is prompting many consumers to look for differentiation," the report notes.

As of 2014, Asia-Pacific was home to 807 million people aged below 14, representing more than 20 percent of the total population, offering an enormous opportunity for growth in luxury childrenswear. The emergence of luxury childrenswear brands has been welcomed by landlords as many of them are looking to expand their offering into toys, bookstores and playrooms in order to attract and retain foot traffic amid competition from online retail.

The emerging retail trends – combined with changing tourism patterns and the ongoing slowdown of Hong Kong’s luxury retail sector – are already impacting luxury retailers’ real estate requirements, resulting in new, and in some cases, weaker demand for different types of retail property. Some of the key trends that CBRE have identified include:

1. Weaker interest in department stores despite continued interest in prime locations.

2. Stronger focus on flagship stores, displaying more product lines, thus making a stronger statement in the market.

3. Increased popularity in short-term opportunities for brands to set up exhibitions, pop-up and concept stores, and workshops, to generate greater consumer awareness.

4. Affordable luxury brands continuing to drive demand, encouraging more shopping centre landlords to offer them anchor tenant space.

5. More interest in upper floor retail space, but limited to top-tier malls and driven by F&B and childrenswear segments.

"Driven by the emergence of affluent consumers and the rise of the number of millionaires in the region, Hong Kong will remain an important market for international luxury brands as new names enter the region. While leasing demand will slow to a more sustainable level, prime space in core areas will continue to be keenly sought after," the report forecasts.

 

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