With the global economic slump cutting into consumer sales, makers of luxury goods are starting to feel the bite, with one study indicating the industry will contract next year. But in Hong Kong, high-end retailers are counting on Asia's wealthy to keep spending.
This holiday season it is impossible to walk quickly through upscale shopping centers in Hong Kong. People, many carrying shopping bags, crowd the aisles.
At a small boutique's recent marketing party, Carol Cheng and friends peruse racks of pricey goods by Hong Kong designers.
Like many consumers here, Cheng wears designer labels. This day, she is outfitted in high-end Japanese and U.S. brands.
Cheng says she thinks Hong Kong people will continue to buy luxury goods, even during the financial crisis.
"Yeah. Why not? If you come with the brand then why not? You know this brand. You want this brand," she said. "You get whatever you want."
Hong Kong's main shopping districts are filled with luxury retailers. The city does not tax luxury items such as jewelry, clothes and leather goods, so for decades it has drawn tourists from around Asia looking for bargains.
Luxury retailers are hitting sales targets
This holiday season, some luxury retailers here say they are just hitting their sales targets. And the outlook is gloomy for the global market. A recent study by marketing firm Bain and Company says luxury sales are likely to contract next year.
In Asia, many luxury retailers hope newly rich consumers in China and India will keep buying, and help offset sales declines in markets such as the United States and Europe.
International business consulting firm KPMG says there is room for growth in China's luxury market.
Nick Debnam studies China's consumer markets for KPMG. He says in the past few years more luxury retailers have entered China. And that means more Chinese are becoming familiar with, and buying luxury goods.
"Because there are successful businessmen and successful businesswomen around the whole of China and these guys, once they've got some money to spend, the luxury product is a way of almost showing how successful you are," said Debnam.
Demand for luxury goods is increasing in China
Thibaut Mathieu caters to the growing Chinese taste for fine wines. As marketing manager of ASC Fine Wines of Hong Kong and Macau, he held a champagne tasting recently in Hong Kong.
He said he expects people to keep buying fine foods and wines, even in an economic downturn. He says they did so in 2003, following the SARS outbreak in the city.
"Customers were not going out anymore but they were eating and drinking and entertaining a lot more at home," said Mathieu. "So we might expect something like that. Apparently, in China, it's already happening."
Recently, China announced measures to boost Hong Kong's economy, including allowing more mainlanders to visit. Many Chinese come here specifically to shop.
John Tsang is Hong Kong's financial secretary. He says the rich will continue to buy luxury goods.
"There is a pretty large segment of people who have a pretty good income and they, a lot of them, are pretty good savers so they should be able to continue to spend money during a bad economic period," said Tsang.
Will middle-class consumers offset decline in retail sales?
However, there are concerns that even if Asia's wealthy and middle-class consumers keep their taste for high-end goods, there are not enough of them to offset the decline in sales in Japan, Europe and the U.S.
Japan's luxury market, 12 percent of the global total, saw sales fall seven percent this year.
China's economy also is in decline, after years of record growth. The stock market, consumer confidence and credit markets all have slumped. Businesses are laying off staff.
That may make Chinese consumers even more frugal. The country has no real social security program, and families must pay for schooling and healthcare themselves, plus save for retirement. That means Chinese workers, fearing job losses, are likely to increase savings despite government efforts to spur spending.
Carol Cheng and her friends took away shopping bags of gifts from the boutique's party this holiday season. But that night most of them bought nothing. They said they came to enjoy the free drinks, snacks and entertainment. They did not come to shop.