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Ni hao, big spender.
This story first appeared in the October 27, 2010 issue of WWD. Subscribe Today.
China’s fast-growing economy is fueling a rise in outgoing tourism, with shopping for high-end fashion and beauty products near the top of travelers’ agendas — a windfall that is creating happy smiles among luxury brands and retailers from Paris to Los Angeles. Brands from Louis Vuitton to Ralph Lauren, Graff to Gucci have all pointed to the wave of Chinese tourists traveling abroad as a key factor in luxury’s resurgence after the global recession of 2008.
Indeed, the China Tourism Academy estimates Chinese tourists spend about 500 euros, or about $700, an hour when shopping in Paris, home to Galeries Lafayette and Louis Vuitton’s flagship on the Champs-Elysées.
“They like buying high-end products with better quality, and of course higher prices. Fashion-forward products or products still not being sold in the domestic market are very popular,” said Zhang Guangrui, head of tourism research at the Chinese Academy of Social Science. “Now, on average, Chinese tourists spend more money thanAmerican and European tourists abroad, and also more than Japanese abroad.”
Chinese tourists made 47 million trips abroad last year, according to China’s National Tourism Research Institute. Those able to travel overseas tend to possess some common characteristics — chief among them that they are well-heeled and willing to spend top dollar on luxury goods and brand names. The new breed of overseas Chinese tourists is looking to buy things they can’t get in China, or can get more cheaply elsewhere. Given high luxury goods taxes that continue to be levied in China, most high-end items do cost less in other countries.
The pool of tourists from China who like to spend big now largely consists of the country’s wealthiest elite — a small percentage of the overall population. The latest numbers available show that tourists from Mainland China spent $42 billion abroad in 2009, with more than $17 billion of that spent in Hong Kong, by far the most popular shopping destination for wealthy Chinese tourists.
Sarah Rutson, fashion director at Hong Kong-based Lane Crawford, said Mainland Chinese tourists account for between 20 to 40 percent of its overall store business, the higher percentage generated at its Canton Road and Times Square locations, which tend to be magnets for those on day or weekend tour packages.
She said the latter shoppers tend to zero in on skin care, shoes, jade jewelry and single-diamond stones, whereas more “international” Mainland Chinese tourists frequent Lane Crawford’s flagship IFC or Pacific Place locations in search of high-end jewelry and cutting-edge ready-to-wear from the likes of Alexander McQueen, Givenchy, Lanvin, Rick Owens and Céline.
“The majority of Mainland Chinese pay with cash,” Rutson said. “They also buy very quickly — they know what they want and do not mess about.”
Ditto for gifts, whether corporate or personal. Rutson said skin care is a popular gift item among those on package tours, while corporate and international travelers gravitate to jade, exotic-skin accessories, expensive crystal and handcrafted Italian jewelry, or watch boxes that range from $6,000 to $10,000 a pop.
Bruno Pavlovsky, president of fashion at Chanel, said Chinese tourists now rank among the brand’s top five nationalities, and their numbers have been growing steadily over the past 18 months, particularly in Paris, a top international destination, and other high-profile European capitals.
“They are also starting to travel in Japan, and we are starting to see them in Tokyo,” he said. “They are more and more interested in our products.”
Pavlovsky said Chinese tourists zero in on Chanel’s hottest styles, with younger customers oriented to accessories, and more established ones drawn to rtw. Service requirements are demanding. “When they spend 20,000 euros, they want to be treated with the highest levels of service,” Pavlovsky said. “We need to organize ourselves to be sure to provide it to all our customers.”
Joshua Schulman, chief executive officer at Jimmy Choo, said the company is seeing “more and more” Chinese consumers, “both at home in China, but also in gateway cities around the world. In Europe they have a much more important presence than they did a few years ago.”
With rising numbers of Chinese tourists at Choo stores in London, Paris and Milan, “it really…impacts the way we look at our European business,” Schulman said. After analyzing sales at the company’s European stores, he found that smaller shoe sizes are often the first out of stock in department stores in continental Europe. “This is something we’re really looking at in terms of the way that we assort and allocate for [Chinese shoppers],” said Schulman.
Myf Ryan, general manager for marketing, U.K., at Westfield, said Westfield London, the shopping center group’s development in West London, has “firmly established itself on the London tourist circuit and the Chinese market is incredibly important to [the mall],” adding that the mall is seeing “a growth” in Chinese visitor numbers. “Luxury brands that we house within The Village [Westfield’s upscale area], such as Louis Vuitton, Dior and Prada, prove popular [with Chinese tourists], and purchases of fashion accessories such as Swiss watches is a common trend,” said Ryan. “Equally, quintessential English brands such as Burberry and Mulberry have a great appeal.”
Ryan said Westfield’s tourist customers from all regions are generally business travelers between 35 and 55 years old, and often make purchases in cash.
Chen Xiaobing, head of the German tour agency CAISSA’s China operations, said Chinese tourists are looking for beautiful scenery, clean environments and other glimpses of nature that can’t be found within China when they travel. Chen said more than half the company’s customers have been abroad at least twice, and they are constantly seeking new experiences. Unlike many Western tourists, Chinese enjoy traveling in large groups on organized tours.
“In recent years, more people have chosen to spend their holidays abroad,” said Chen. “Chinese tourists are fond of visiting interesting places and enjoy sharing their traveling experiences with friends — this is something that won’t change easily.”
Global Blue Group, which tracks tax-free shopping, has logged sharp spikes in Chinese tourist flows in continental Europe. In the first nine months of this year, Chinese shoppers surged 103 percent in France, 90 percent in Italy and 71 percent in France.
The number of Chinese tourists shopping in department stores rose 125 percent in the U.K., 217 percent in Italy and 243 percent in France, where “they can easily find sales people speaking their language,” said Pier Francesco Nervini, Global Blue’s vice president of international key accounts. “They are less structured in this sense in the U.K.”
At Galeries Lafayette on the Boulevard Haussmann in Paris, there are customer service counters that cater to several Asian languages, including Mandarin, Cantonese, Japanese, Korean, Indonesian and Malay. Toward the back of the gigantic store’s main floor is a second showcase for big cosmetics brands like Chanel and Estée Lauder staffed with predominantly Chinese women who speak Mandarin, Cantonese and even Shanghainese.
Coach also added Chinese-speaking associates in several of its stores.
“As our brand awareness has grown in China, we are seeing significant interest in Coach from the Chinese tourist in North America, notably in key destination cities such as New York, Vancouver and Toronto,” said Mike Tucci, Coach Inc.’s president of the retail division, North America. “At our New York flagship location on Madison Avenue in particular we have seen a notable increase in traffic from the Chinese consumer.”
Generally, he added, tourists represent a “small but important piece” of Coach’s total business. “Within that segment the Chinese shopper is our fastest growing consumer group,” Tucci said.
La Rinascente saw a 65 percent increase in year-to-date sales from Chinese tourists compared with 2009 and a 52 percent increase in terms of transactions according to Monica Ferreri, head of communications for the Milan department store. Average spending increased by 9 percent compared with the same period in 2009.
Based on a sampling of 17 shoppers interviewed by WWD in Paris on Monday, most were in France on organized tour groups, armed with shopping budgets ranging from 300 to 2,500 euros, or about $420 to $3,500 at current exchange rates.
Branded goods, particularly from Chanel and Louis Vuitton, were highly sought, with handbags, watches and men’s clothing among key categories.
Value Retail Management Srl has found that Chinese visitors to its Fidenza Village Outlets outside of Milan spend on average 5 percent more than other foreign clients. They currently represent 7 percent of international visitors, with an average age of 25.
According to VisitBritain, the organization that tracks tourism patterns in the U.K., the Chinese spent a total of 117 million pounds, or $183.7 million, in the U.K. last year, with an average spend per visit of 1,310 pounds, or $2,056.
In a recent report, the organization said Chinese visitors would prefer to save money on food and accommodation, but spend more on gifts and local products for themselves. It’s a gift-giving culture, and the Chinese like bringing back “local” brands, such as Burberry, Clark’s shoes and Scotch whisky, the report said, adding that another driver behind these purchases is the guarantee that, because they are bought in the local market, they are not fakes.