Article from Northcroft Hong Kong office
When the World Health Organisation announced COVID-19 had been declared a pandemic, there was a global wave of uncertainty as organisations, nations and individuals all prepared for the worst. Anticipating a worldwide economic downturn, luxury goods manufacturers and high-end retailers began looking for ways to reduce costs as they braced for a downturn in sales.
As a specialist quantity surveying consultant for prestige and high-end retailers globally, Northcroft was tasked with finding significant cost savings for its clients’ existing store upgrades and planned new stores.
They approached the cost saving measures in 3 ways:
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- For some clients, travel embargos and safety concerns meant Brand Managers and designers were unable to conduct site inspections of their new boutiques. So the Northcroft team negotiated with contractors to suspend work on new store fit-outs and existing store upgrades for one year.
- For cancelled or postponed client projects, Northcroft negotiated with vendors and contractors to accept partial payments or payment instalments on behalf of its clients.
- Northcroft also negotiated with contractors on behalf of its clients who were forced to close boutiques due to lockdown orders. These negotiations involved requesting discounts to Contract Sums in order to decrease the impact of capital expenditures on boutiques that were unable to operate.
Northern hemisphere summer brings warmth to luxury retailers
Unlike traditional economic downturns, the impacts of COVID-19 have created growth in some industries while devastating others. It’s the same with consumers. For those who were able to continue working, there were few opportunities to spend their money with travel off-limits. So they turned to shopping.
Current economic data is showing many luxury brands and high-end retailers are experiencing double digit growth – despite the pandemic and an initial downturn in sales. Yet many mid-level retailers continue to struggle.
China is one of the biggest growth markets for luxury and prestige brands along with the US. In fact, according to a report released by Bain & Company in May, labels like Hermes and Kering have already surpassed their 2019 sales levels.
Shoppers in their 30s have been the largest contributors to this increase in luxury brand sales at 21.4%.
With all this interest in prestige brands, Northcroft’s clients are now asking them to assist with opening new boutiques – including pop-up stores – to meet demand.
Astoundingly, clients who asked Northcroft to assist with suspending or cancelling projects at the beginning of 2020 began to flourish. To meet demand, not only were existing store upgrades recommenced, Northcroft was asked to assist with facilitating 84 new store openings in the Asia-Pacific Rim during the second half of 2020.
In addition, Northcroft are currently assisting their prestige and high-end retail clients with a staggering 109 new store openings in the region in 2021. This includes 59 new stores (both temporary and permanent) opening in the People’s Republic of China (PRC) as well as several new luxury stores in Hong Kong, the Philippines, Korea, Vietnam and Singapore.
From downturn to expansion in just a few months
For Northcroft’s luxury brand clients, 2020 was a roller coaster ride of epic proportions! But the Northcroft team were always by their client’s side to assist with meeting demand and exceeding customer expectations. If you are starting a project and would appreciate a business ally who will stick with you through all the ups and downs, contact Northcroft.