By  on April 11, 2011

Meet the luxury world’s new deep-pocketed consumer.

Journey down Fifth Avenue, stroll along the Champs-Elysées or wander down Via Montenapoleone, and chances are you’ll encounter at least a few Chinese tourists laden with shopping bags. This year, more than 57 million Chinese are expected to travel abroad, an increase of 3 million from 2010, according to a report released from the China Tourism Academy earlier this year. The report estimates the travelers will spend $55 billion on international travel.

The Shanghai-based China Market Research firm estimates that Chinese tourists spent $54 billion outside the Mainland in 2010, and tourism spending abroad is growing at about 12 to 14 percent a year. Chinese tourists as a group actually spend about $6 billion more overseas than they do domestically, due to the large number of trips to Hong Kong —and increasingly Europe —- to buy big-ticket luxury brand items like bags, shoes, clothes, watches and jewelry.

Regional destinations like Singapore, Macau, Hong Kong and Taiwan still remain at the top in terms of outbound tourism for Chinese. Although Europe and America are growing in popularity, it is still difficult for China’s travelers to get visas, particularly to the U.S.

Japan and South Korea are more popular destinations for Chinese tourists than the U.S. or Europe, but in the wake of the earthquake, tsunami and subsequent nuclear crisis in Japan, thousands of Mainland tourists have canceled trips to Tokyo and other parts of the country. Yet there is little indication these tourists have, so far, switched travel plans to America or even Europe, according to Fritz Demopoulos, founder of Qunar.com, a travel search engine in China.

“Tokyo is not really in the same bucket as London or New York or San Francisco or Los Angeles,” Demopoulos said. “Instead of going to Tokyo this year, they will go to Seoul or Kuala Lumpur or back to Singapore.”

Stories are rife about rich Chinese traveling overseas and spending outrageous amounts of money in luxury stores stretching from London to Los Angeles. But there are relatively few in-depth details about what, exactly, China’s rich, particularly those from second- and third-tier cities, are actually buying.

WWD gleaned some rare insight into these consumers and their buying habits when it accompanied a group of 140 well-heeled Chinese consumers on a recent trip to the United States, with stops in New York, Boston, Las Vegas and Los Angeles. The group of newly rich — some were multimillionaires and even billionaires — came from across China. For most, it was their first time leaving their home country.

Yan Jiehe, a construction tycoon considered one of China’s wealthiest men, organized the trip. Two years ago, Yan founded an exclusive CEO club aimed at helping small enterprises pool their resources to secure investment or government contracts for construction projects. Those who went on the trip to America were largely members of the club or family members of members of the club. Many never graduated from college.

During their 12-day tour, the group met with Bill Clinton in New York and Larry Summers at Harvard, gambled in Las Vegas and toured Universal Studios in Hollywood. When they were not sightseeing or eating at Chinese restaurants in Chinatowns across the U.S., they shopped — a lot.

“To spend money,” Rob Guo, a 31-year-old who works for Yan’s CEO club, said. “That is their number-one task.”

The purchasing preferences of the group were a mix of the expected and the unexpected, and what they ultimately ended up buying served as a sort of litmus test for which foreign brands are effectively marketing to Chinese back on the Mainland.

All had a fixation with Louis Vuitton. The men sought out Giorgio Armani and Ermenegildo Zegna; women wanted Chanel, Chloé and Prada. Most were unfamiliar with Salvatore Ferragamo, Celine and Balenciaga. They bought suitcases to haul as much as possible back home. Distrustful of credit cards, most paid for their goods with stacks of cash.

They also revealed a keen desire for health-related products and stocked up on bottles and bottles of vitamins, which they consider more reliable than the ones they find back home.

Most were reluctant to talk on the record about just how much money they spent, as publicity about ostentatious shopping can sometimes have negative consequences back home. In 2006, a Chinese court ordered Yan, the construction tycoon, to “avoid extravagant spending and not use luxury cars” after his company defaulted on loans, according to the state-run China Daily newspaper. And, in a curious move, the government in Beijing last month banned outdoor advertising using terms that celebrate opulence and high living.

Nevertheless, the tourists’ consumption of luxury was nothing short of conspicuous, and it started well before they landed on U.S. soil. In duty free shops in Beijing Capital International Airport, the women in the group cleared out entire shelves of expensive cosmetic products, including those from La Prairie, La Mer and Lancôme, the preferred beauty line for most of the women.

In Manhattan, most of the travelers dropped tens of thousands of dollars in a matter of hours on Fifth Avenue, which was only a few minutes walk from the Crowne Plaza hotel in Times Square where they stayed.

Louis Vuitton’s flagship on Fifth Avenue was one of the biggest draws, especially among the women, who asked to see the latest designs “one by one,” according to Guo, who helped translate. Zegna, Prada and Gucci were also popular, as was the Apple Store, where one shopper purchased four computers.

“They were not very familiar with Ferragamo,” Paul Xia, a guide with Lukintl, a Beijing-based tour company that has organized trips for thousands of Chinese to America since it was founded in 1996, who went on the Fifth Avenue shopping excursion, said. “They were not familiar with Balenciaga. Celine they did not know, and Tod’s, most of them did not know.”

According to Xia, Chinese tourists come to the States with thousands of dollars in cash. Few carry foreign credit cards because “the Chinese don’t trust each other, so they don’t trust credit cards,” Xia said. And where they choose to spend their money largely depends on where tour companies decide to take them, whether they can find a way to reach retailers by themselves and whether there is anyone around who can translate or speak Chinese. In most cases, there is not.

“Local tour guides introduce the shops, so they go there,” Roger Wang, also with Lukintl, said. “They don’t know where to buy, but they will buy whatever they find.”

In Boston, the second stop, the group didn’t go shopping. In Las Vegas, they shopped at Caesar’s Palace and once again hit up Vuitton. Yan, the tycoon who organized the trip, went to the Armani store and ordered “hundreds” of suits to gift his business associates back in China, according to his assistant.

The main attraction, however, was the outlet malls.

Tour buses picked the group up from the Paris Las Vegas hotel and drove them for a two-hour discount power shopping trip to the Las Vegas Premium Outlets, where Zhan Hongbing — a businessman who did not finish junior high school yet has managed to make millions selling kiwis and developing real estate in Chongqing, a metropolis in southwestern China — was utterly lost.

Zhan did not recognize Ferragamo and was completely unfamiliar with Polo Ralph Lauren and almost all the other brands, either because he did not know their English names or he had never heard of them. Finally, he settled on the Burberry outlet, where sales staff said they were looking to hire someone who speaks Mandarin because of the high number of Chinese tourists who come through.

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