IAG December 2015

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Insights Retail review In years gone by retail was an afterthought for an Asian integrated resort. But with the rising Chinese middle class and its voracious appetite for brands, retail is as crucial as any other non-gaming element. How is retail shaping up in Macau’s new normal? IAG recently sat down with Gloria Siu, Galaxy’s Assistant Vice President of Retail, for a chat about how Macau’s retail sector is faring. While Siu was quick to clarify her words represented her own personal point of view rather than her employer’s, they nevertheless provide interesting insights to the retail sector. IAG: How is the general level of retail sales now compared to what it was before the gaming revenue plunge? Gaming revenue is down over 30%, is retail the same? Gloria Siu: With the recent macroeconomic effects and government policies, in general retail business has dropped compared to last year. Unlike gaming, retail is a big word and has a wide range of components, including the “luxury”, “affordable” and “must-buy” product mix. Most of the drop in gaming has come in the VIP sector. In such an environment, customers tend to spend less in luxury, maintain affordable purchases and increase buying must-buy products. Also some shops and brands benefit from differences between Hong Kong, Macau and China, such as tariff 24 inside asian gaming December 2015
Insights differences with duty free goods, quality assurance differences (think baby products, healthcare and drugs) and daily price variation such as with gold. IAG: How have the new openings of Galaxy phase 2 and Studio City affected retail in Macau? GS: The new openings of retail portfolios offer a wide range of choices to both locals and tourists. Quite a few international brands have entered Macau for the first time. With environmental and political policy changes, Macau is stepping into a “new normal”, which means apart from gaming as the major revenue, non-gaming sectors such as retail and MICE are playing more important roles. The increased diversification is a healthy and positive direction that Macau is heading in. IAG: Are the tastes of the mainland visitor maturing compared to a few years ago? GS: Definitely. The middle class clusters have been growing rapidly with China’s booming economy in the past few years and Chinese people’s brand awareness is growing. More and more shopping malls are opening in China with international brands and Chinese people travel more to Hong Kong, Macau and destinations outside China. Visa requirements for travelling Chinese are relaxing. A few years ago Chinese people might look for brands with big logos that are easily recognizable on the street to show off, but now they are looking for subtle luxury symbols that makes them feel different. Things like luxury designer labels, limited editions and so on. While there is no doubt the overall brand awareness of mainland tourists in Macau is still behind those from Hong Kong and Macau – especially with more and more mainland tourists from second and third tier Chinese cities entering Macau – catching up the gap won’t be too far away given all the rapid changes in China. IAG: There are plenty of high-end offerings in retail for the VIPs, but what about midrange for the growing mass floor player? GS: Types of retail offerings are all about supply and demand. Usually retail mix positioning and planning is implemented and confirmed before retail professionals approach retail brands to come into the malls. The whole planning, leasing and opening process generally takes around two to four years. Therefore, what you see now reflects the market demand two to four years ago, which explains why there are plenty of high end offerings for VIPs in the current retail mix at most malls. With the “new normal” market, I believe the retail mix will be inclined to become more affordable. However, the retail mix also depends on the whole positioning of the property and its branding. If the property’s “A few years ago Chinese people might look for brands with big logos that are easily recognizable on the street to show off, but now they are looking for subtle luxury symbols that makes them feel different.” December 2015 inside asian gaming 25
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IAG December 2015

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