JLL forecasts | Cosmetics and fast fashion to benefit from decline in luxury retail

The recent decline in the luxury retail market may benefit cosmetic and fast fashion stores in Macau, says Michael Klibaner, Jones Lang LaSalle’s (JLL) regional director and head of research for Greater China. He also believes that, if the impact of the Chinese anti-graft measures starts to show its effects, it may be time for the government to look into rebranding Macau.
Mr Klibaner says that the proliferation of watch and jewelry stores is a response to the types of tourists coming into Macau from mainland China, who are eyeing the price differentiation between the two. However, he reckons that this has changed following the launch of anti-corruption measures by Chinese President Xi Jinping, which he says could hurt the whole retail industry.
“The luxury watch and jewelry brands are definitely consolidating. They’re closing stores and they’re rationalizing their footprint. That’s a logical economic response to the market,” he said.
Moreover, Klibaner noted that there has been growth in the cosmetics sector, as well as the food and beverage and fast fashion sector, which will gain a foothold in Macau due to a weakening luxury retail sector. However, he observed that many restaurants have been “priced out of the market” because of the constant growth in rental prices, “so I think there may be some opportunities, maybe not on the high streets but the secondary streets for restaurants to come back in.”
Furthermore, the regional director said that the Macau government should start rebranding Macau if the impact of the Chinese anti-corruption measures becomes apparent.
He said that Macau still has not reached the stage of worrying about branding and rebranding at this moment, as businesses are still booming. “But if the impact of the current anti-corruption campaign on the economy of Macau is felt, with gaming revenue [in December] down by 30 percent, this could be the moment when [government officials] do need to think about the Macau brand,” he said.
Klibaner used Las Vegas as an example, pointing out the city’s success in transforming itself into a tourist destination for the whole family, with the MICE (Meetings, Incentives, Conferencing, Exhibition) industry driving a huge amount of visitors to the city.
The JLL regional director made the comments this week on the sidelines of a business luncheon organized by the British Business Association of Macao, in conjunction with the American Chamber of Commerce in Macau and the French Macau Business Association. He gave a presentation on the impact of e-commerce on China’s retail and logistics properties.
During the Q&A session that followed, Klibaner explained that the future development of Hengqin Island would play a huge role in the successes and risks of the retail sector in Macau. “In terms of mass market retail, if Hengqin Island is able to achieve even half of the successes that they have planned for, in terms of developing the service sector and bringing in hundreds and thousands of workers from mainland China and around the region; if Hengqin Island is successful in creating a vibrant new commercial district in Macau, it certainly will be a positive for the retail sector,” he said.
Klibaner also commented on the luxury retail market, noting that the creation and maintenance of exclusivity is one of the big challenges. He also said that the experience of buying a luxurious product is also an element that drives people to luxury brands.