Paris Fashion Week is swiftly winding down, with the week’s most anticipated show, Hedi Slimane’s Celine debut, out of the way and big names like Chanel, Miu Miu, and Louis Vuitton set to close out the Spring/Summer 2019 collections on Tuesday. Meanwhile, some of high fashion’s top-spending consumers are embarking on a week of their own: Golden Week. The week-long Chinese national holiday, which has been likened to the Unites States’ Fourth of July celebration (albeit much longer), provides an opportunity for the Chinese to not only spend time abroad – but to spend.
Aside from tourist-based travel to staple locations in China, as well as Japan, Hong Kong and Macau, Thailand, Malaysia, and Myanmar, and longer haul trips to the United Kingdom and other European regions (the U.S. dropped from the top 5 destination in 2017 to number 11 this year in light of political tensions), many wealthy Chinese travelers – who have been key drivers of global luxury goods sales for more than a decade and who do the vast majority of their shopping for pricey high fashion items and other luxury goods outside of China – will use the week to shop.
China’s Ministry of Commerce reported that retailers recorded an average of $226 billion in daily sales during last year’s Golden Week, a 10.3 percent increase on 2016’s daily sales average. Yet, the majority of spending from a fashion and luxury point of view will take place outside of the country, with a whopping more than half of outbound tourists shopped at duty free retailers last year.
Chinese consumers’ preference for shopping internationally 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.