IN THE NEWS

Wall Street Journal|Sep 14, 2015

Chinese Luxury Shoppers Speak Euro

Sales of designer goods struggle in China, but shopping abroad accelerates
By Jason Chow, Sept. 14, 2015 4:11 p.m. ET

PARIS—Outside Galeries Lafayette’s flagship department store here, 26-year-old Chong Jing stands with his family from the coastal Chinese city of Qingdao, eager to splurge.

Chinese bus tour groups crowd the store’s entrances from the street. Inside, the Louis Vuitton and Chanel boutiques are so full of Mandarin-speaking shoppers that security has cordoned off the area, forcing other Chinese shoppers to wait.

“My family is here to buy,” said Mr. Chong, a student in France. “It’s all so much cheaper here. The yuan has lost some value, but Chinese buying power is still strong.”

Luxury brands are struggling within China, quietly discounting merchandise to get rid of excess inventory, industry consultants say. But China’s economic slowdown and stock market slide haven’t dented Chinese travelers’ European shopping sprees—at least not yet. Global Blue, a tax-refund service often used by visitors, said it has witnessed a 75% spike in spending by Chinese tourists during the first six months of the year and a 72% increase in August alone, the month when the Chinese currency was devalued and equity prices plummeted.

The average spend by Chinese shoppers in Europe processed by Global Blue over the first six months of the year was €981 (US$1,112), a 7% increase from a year ago.

Thanks in part to relaxed rules for tourist visas, the French government now expects the number of Chinese tourists to exceed 2 million in 2015, up from around 1.5 million in 2014. In the first half of the year, Paris alone reported a 49% increase in Chinese visitors.

It is a welcome boom for Gucci owner Kering SA and luxury-goods conglomerate LVMH Moët Hennessy Louis Vuitton SA, although the future of the tourist rush is uncertain as the declining yuan and economic upheaval could hurt the Chinese population’s ability to travel and spend abroad.

Luxury shoppers in China itself have pulled back. After rapidly expanding in mainland China in recent years, luxury companies are now saddled with museum-like stores that are starved for customers and brimming with baubles at risk of falling out of fashion with the changing of seasons. Some of that stems from Beijing’s crackdown on corruption in recent years, a policy that put the kibosh on lavish gift-giving as well as some ostentatious displays of wealth—a shift that came way before the gutting of the Chinese stock market.

“You prepare for the worst, but then the worst is even worse than what you prepared for,” said Franklin Yao, a retail consultant based in Shanghai for SmithStreet Solutions. “It’s a come-to-Jesus moment. Everything we’ve been doing we have to rethink.”

Several high-end fashion groups, including LVMH, Kering, Prada S.p.A. and Burberry PLC declined to comment.

Brisk business in Europe is helping to cushion the blow for luxury brands. Chinese shoppers are avoiding the onerous import duties at home that can often push the price of goods to twice the amount charged in Europe, while also taking advantage of the weaker euro.

Brian Buchwald, a retail consultant at Bomoda, estimates that up to 80% of Chinese luxury purchases today originate outside of mainland China as consumers travel abroad or purchase from agents who buy elsewhere and resell on the gray market. Consumers prefer the retail experience of buying, plus, they are more confident that the items they purchase are authentic when they shop abroad, he said.

Zhang Yuhan, a 29-year-old homemaker in Beijing recently returned to China from a group tour in Spain, where she bought a Gucci bag for about €420 (US$471) at an outlet mall outside Barcelona. “No matter how bad the economy is, luxury goods are still way cheaper in Europe than in Beijing,” she said.

China, meanwhile, lacks the vast network of outlet stores that luxury brands tap to discreetly clear out slow-sellers. Fashion brands are loath to steeply discount goods sold in their own stores, because that raises consumer doubts about the inherent value of their wares—and yet that is beginning to happen.

SmithStreet consultants noted that several brands have discounted by as much as 50% earlier this year to clear last season’s inventory—more than the usual 30% discount that follows an end-of-season markdown.

Link: http://www.wsj.com/articles/chinese-open-luxury-wallets-for-europe-1442261511

About SmithStreet

SmithStreet is a Shanghai-based, boutique consulting firm focused on China growth strategies. By understanding China and solving business challenges through a holistic and innovative approach, we provide clients with deep insight into China’s consumer, B-B and healthcare industries. Since our founding in 2007, we have served Fortune 500 companies as well as global 2000 companies in a variety industries to achieve China goals. We are your bridge into China.

For more information about SmithStreet, please visit: www.smithstreetchina.com.

Follow SmithStreet at LinkedIn and Twitter.

Media Contact:
media@smithstreetsolutions.com


Connect with SmithStreet
In the News

Reuters|Nov 18, 2016

New Look Seeks Fashion Edge in China with Local Designs

Bloomberg|Jul 18, 2016

Nestle Seeks China Turnaround Online as Competitors Abound

German Chamber|Jun 16, 2016

A Middle-Class Force Awakens

Retail Real Estate|Apr 07, 2016

The China Challenge: Where to Expand Luxury Retail

Luxury|Apr 07, 2016

Luxury Firms React to China Economic Upheaval

LoginNot a registered user? Register now.
E-mail
Password
Remember me

Login using your social network

RegisterAlready registered? Login now.

SmithStreet provides you source for today’s leading business ideas. Our content explores the topics critical to China market today.

Create your SmithStreet account:

E-mail address & password

*E-mail
Make sure you typed it correctly.
*Password
Make it 6-10 characters, no spaces
*Confirm Password

Personal Information

*First Name
*Last Name
Company
Job Title
Job Function
Country
Screen Name

Subscribe

Subscribe to our China Spotlight weekly news feed - a complimentary email newsletter that matters to your China strategy.

Healthcare

Consumers and Retail

I agree with the Legal Terms.
RegisterAlready registered?

Create your SmithStreet account:

*E-mail
Make sure you typed it correctly.
*Password
Make it 6-10 characters, no spaces
*Confirm Password

Personal Information

*First Name
*Last Name
Company
Job Title
Job Function
Country
Screen Name
Legal Terms
This is the official privacy policy for www.smithstreetchina.com, which is administered, owned and operated by SmithStreet. This policy is intended to provide you with important information regarding your use of the Site.

This Site is owned, operated and targeted for use in China and may not comply with other nation’s laws or regulations. Your continued use of this Site implies your acceptance of our policies and practices as described below.

We do not collect any personally identifiable information from visitors to the site unless they voluntarily submit information.

You may choose to subscribe to our email edition, which requires you to submit a valid email address. This service is operated for free on an opt-in basis, and you may unsubscribe at any time by emailing info@smithstreetsolutions.com.

The information we collect is used for internal review and is then discarded, used to improve the content of our website page.

We do not set any cookies.

If you do not want to receive e-mail from us in the future, please let us know by sending us e-mail at the above address.

All of the content posted on our Site is created in-house. We do summarize news from other resources by following fair convention. If, for any reason, you would like us to remove any content, graphics, or other information that you consider a breach of copyright law, please email us, or feel free to call us by below number.

We reserve the right to revise this policy at any time. Revisions will be posted in this location. Any and all posted revisions are effective immediately. Please check back often to stay informed about your use of the Site.

Please contact us directly if you have any questions about this Policy or anything else.

Email: info@smithstreetsolutions.com
Tel: (8621) 6565 6533

This Policy was last modified on November 1st, 2013 and is effective immediately.