While Paris Fashion Week is swiftly winding down, some of high fashion’s biggest consumers are embarking on a week of their own: Golden Week. The national holiday, which has been likened to the Unites States’ Fourth of July celebration (albeit much longer), sees manyChinese natives taking long-haul trips. This year, upwards of 710 million Chinese tourists are expected to travel domestically or abroad, up 10 percent from last year, according to China’s National Tourism Administration.
The week-long holiday provides an opportunity for the Chinese to not only spend time abroad (According to Chinese travel services company Ctrip, the top destinations this year are expected to be Thailand, Japan, Singapore, the U.S., and Vietnam) – but more importantly, to spend. Indeed, wealthy Chinese tourists have been key drivers of global luxury goods sales for more than a decade, and they do the vast majority of their shopping for pricey high fashion items – and other luxury goods – outside of China.
Chinese consumers’ preference for shopping outside of their home country is largely tied to the hefty import tariffs and consumption taxes on goods purchased on Chinese soil. Add to that relatively higher pricing strategies and the result is that goods purchased in China can cost 50 percent more than those purchased outside of its borders. For instance, “a Louis Vuitton handbag typically costs 30% more in Beijing than in Paris,” as noted by the Economist in 2014.
With this in mind, “the luxury goods business is not so much about China's domestic sales, as it is the increasingly peripatetic Chinese,” reports management consulting firm McKinsey. And the money that is being spent on these trips is growing. In 2014, spending outside of China was estimated to be roughly $154 billion, up from $18 billion in 2002. Of those figures, “shopping continues to comprise the biggest chunk,” per McKinsey. “One-third of what’s spent on travel goes toward buying goods – often luxury items – to take back home.”
Within the past several years, nearly three-quarters of the traveling Chinese consumers surveyed by McKinsey reported that they had purchased a luxury product while abroad within in the past 12 months. And this makes sense, as Chinese consumers – while not immune to the growing trend towards experiential activities – are still very much drawn to travel holidays that center largely on shopping.
Spending associated with this year's Golden Week is expected surpass last year’s; consumers are slated to spend a combined 590 billion yuan ($88.6 billion), 12 percent more than last year.
“Golden Week is a positive one for retail-related [activities] because it’s not a family holiday,” Hunter Williams, a partner at consultancy Oliver Wyman, told WWD. “It tends to be more about travel and spending. It’s not like Chinese New Year and other holidays where people head home. It ends up being a ‘for me’ holiday.” And with that, a boon in spending for luxury brands.