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April 26, 2011

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Chinese shoppers on a US spree

THEY travel in groups, they are loaded with cash, buy in multiples and don't look at prices. And they buy fancy luggage to take all their luxuries back from America to China. Lara Farrar goes shopping.

Journey down Fifth Avenue, stroll along the Champs-Elysees or wander down Via Montenapoleone, and chances are you'll encounter 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 the China Tourism Academy. An academy report estimates the travelers will spend US$55 billion on international travel.

The Shanghai-based China Market Research estimates that Chinese tourists spent US$54 billion outside the Chinese mainland in 2010, and tourism spending abroad is growing at 12-14 percent a year. Chinese tourists actually spend about US$6 billion more overseas than at home, due to the many trips to Hong Kong - and increasingly Europe - for big-ticket luxury brand items like bags, shoes, clothes, watches and jewelry.

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.

Women's Wear Daily 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 are multimillionaires and even billionaires - came from across China. For most, it was their first time outside China.

Yan Jiehe, a construction tycoon and one of China's wealthiest men, organized the trip. Two years ago, he founded an exclusive CEO club to help small enterprises pool resources to get investment or government contracts for construction. Those on the trip were largely members of the club or family of club members. 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 US, they shopped - a lot. High-end Macy's and brand outlets. They love American supplements and they load up. They also load up on dependable US electric shavers.

"To spend money," says Rob Guo, a 31-year-old working for Yan's CEO club. "That is No. 1."

The group's purchasing preferences were both expected and the unexpected, and their purchases served as a litmus test for which foreign brands are effectively marketing to Chinese back home.

All had a fixation with Louis Vuitton. The men sought out Giorgio Armani and Ermenegildo Zegna; women wanted Chanel, Chloe 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.

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, including taxes.

The tourists' consumption of luxury was nothing short of conspicuous, and it started well before they landed. In duty-free shops at Beijing Capital International Airport, the women cleared out entire shelves of expensive cosmetics, including those from La Prairie, La Mer and Lancome, the preferred lines.

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

Louis Vuitton's flagship on Fifth Avenue was a huge draw, and women 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," according to Paul Xia, a guide with Lukintl, a Beijing-based tour company that has organized trips for thousands of Chinese to the US since it was founded in 1996.

According to Xia, Chinese tourists go to the States with thousands of dollars in cash. Few carry foreign credit cards. And where they choose to spend largely depends on where tour companies to take them, whether they can find a way to reach retailers by themselves and whether there is anyone who can translate or speak Chinese. In most cases, there is not.

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

In Boston, the group didn't shop. In Las Vegas, they shopped at Caesar's Palace and once again hit up LV. Yan, the tycoon, 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 made millions selling kiwis and developing real estate in Chongqing Municipalit - was utterly lost. He hardly recognized any brands but settled on the Burberry outlet where staff said they wanted to hire a Mandarin speaker because so many customers are Chinese.

Zhan purchased two Burberry suits, one black and one beige, at a deeply discounted price of around US$200 apiece, as well as five signature Burberry scarves and more than half a dozen polo shirts.

The Coach outlet had the most cachet. Zhan joined the others and everyone bought four or five handbags and four or five wallets at a time. Bags covered with the classic Coach logo were the most popular. One woman went to Dooney & Bourke. Some bought at Vans, Skechers, Hugo Boss and Calvin Klein. Zhan stopped in Wilsons Leather Outlet, where he bagged a black leather jacket.

"I don't remember the shops," he said after the excursion. "I don't know English. I don't remember what brands I bought."

Many were looking specifically for new luggage and stopped last at Samsonite, where Zhan spent more than US$1,500 on suitcases and briefcases.

"There are no fakes in America," says Zhan, who spent US$100,000 in cash and on his wife's credit card. "That is why I shop here."

While LA was widely perceived to be cheaper for luxury products than New York, the least amount of luxury shopping was done there. The tour stayed at a golf resort in a suburb and did not make it to Beverly Hills or any other high-end retail epicenter. Tour guides says those stores are less accommodating to Chinese tourists.

Instead, the group tapped into a shopping network run mostly by immigrants from China, including jewelry stores selling watches by Rolex, Tag Heuer and Patek Philippe, the most sought-after brand.

One out of every 10 on the tour bought at least one watch. Some purchased two or more, priced between US$40,000 and US$50,000, according to guide Xia.

"The Chinese think watches are the mark of a successful person," Xia he says. "They don't have a lot of different suits, so they differentiate themselves with a watch, so they want a good one."

On the last day, after hitting the malls, most return to the Coach store and load up on more handbags and wallets.

A manager remarks that the Chinese are their "best customers. When they come in, we know we will make our day," she says, adding: "I don't know if they realize this - but all of our stuff is made in China."

Wang Xuebo, 40, who runs a loan company in Yantai, a city in the eastern province of Shandong, made his way to a store in a strip mall called Winfeik International Inc, where he bought dozens of bottles of vitamins and some herbal Viagra knockoff.

Owned by Peter Gao, a Chinese immigrant, Winfeik is a virtual one-stop shop for mainland tourists, carrying almost every product on their shopping lists: Samsonite suitcases, Lancome cosmetics and other perfumes, Norelco razors, designer sunglasses, pricey watches, cigarette lighters, American Mint collectible coins and Ed Hardy trucker hats.


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