By  on August 6, 2012

Luxury retailers Saks Fifth Avenue and Neiman Marcus have their eyes set on the super-wealthy Chinese consumer, and they’re expected to implement a new personal identification number-based keyboard system to accept China UnionPay debit cards at select stores over time.

At Saks, the retailer is installing PIN keyboards in its Manhattan flagship on Fifth Avenue next month so it can accept the CUP payments. A Saks spokeswoman said, “We will then roll out to other markets as appropriate over the next few months.” The spokeswoman said the retailer hasn’t yet finalized the list for the rollout, but it will likely be in other “flagships, particularly in the gateway cities, such as San Francisco.”

Neiman Marcus is testing the CUP card at its Honolulu store. A Neiman’s spokeswoman said, “Ninety-eight percent of the CUP cardholders use the debit card.” She said that at some point acceptance of the debit card is likely to be rolled out to all of its stores, but there is no timeline in place.

China’s domestic bank card is already accepted in the U.S. at a variety of merchants located primarily in major tourist cities. There are two types of CUP cards: a credit card and a debit card.

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The CUP credit card is typically co-branded with either Visa, MasterCard or American Express. The credit card, accepted everywhere, has one major limitation: The annual spending limit is $50,000.

In contrast, CUP debit card limitation is technical: It requires the retail establishment to have PIN input keyboards in place. As for spending, the limit is based on the cardholder’s available balance on the card, in yuan. That makes the debit card the preferred choice for use in large luxury-related transactions, even when buying real estate. It’s the easiest way for wealthy, Chinese debit card holders to move their wealth out of China via overseas purchases of art and property.

Many luxury stores along Manhattan’s Fifth Avenue accept the card, such as Van Cleef & Arpels, Cartier and Piaget. A spokesman for Macy’s Inc. said the store has accepted the CUP card since 2004, which also can be used to access cash in ATMs.

The CUP card is gaining acceptance in other high-end shopping districts and centers as well.

Renee Hartmann, cofounder of China Luxury Advisors, an advisory firm counseling brands on their China consumer strategy, said that malls also are identifying ways to facilitate the new shopping method.

According to Hartmann, South Coast Plaza in Costa Mesa, Calif., recently installed CUP pay terminals throughout the mall to enable cardholders to purchase gift certificates for use within the mall at stores that do not yet have the capability to accept CUP cards. According to South Coast Plaza, gift certificates are available in denominations from $20 to $200.

Sean Lee Combs, managing director at Hawaii-based media firm Nihao Media, said, “Neiman Marcus in Hawaii is a big deal for them. Many [Hawaiians] have no idea what it is. When you introduce them to a Saks, they get excited because there are 40 to 50 brands all in one store.”

Combs describes the shopping trips as “still early days” as they are currently dictated by tour guides. That makes it even more important for luxury firms to lay the groundwork now, both to gain brand recognition in the eyes of the Chinese consumer and for later on when they become more comfortable visiting and shopping on their own.

According to Nihao’s internal data, the average shopping spend per Chinese tourist during a visit to North America is $12,120, with the stay lasting 12 days over a three-city tour. Top purchases include watches, handbags, footwear, luxury fashion, jewelry and skin care and cosmetics. The firm hosts shopping events that are cosponsored by China UnionPay.

Michael Zakkour, principal at Technomic Asia, a consultancy firm, said consumers who come to the States buy in bulk to bring back gifts for clients, family members and friends.

“It’s important for retailers to put China UnionPay on their windows so consumers feel comfortable knowing the card is accepted. It also reinforces the brand in their minds, which helps to engage this new global consumer. Brands need to understand that a large part of their future will be with this global consumer,” Zakkour said.

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