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Loading up in Paris, unloading on Taobao
January 14, 2012, Saturday
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Print Edition
EDITOR'S note:
This is the second and final part of an article from Wharton Business School on why many Chinese luxury shoppers like to buy overseas.
Many Chinese consumers prefer to shop outside China because they believe that the luxury shopping experience is better abroad due to superior customer service and a greater selection of brands.
Furthermore, traveling has become part of the luxury lifestyle in China and is considered a status symbol: There is greater cachet in being able to say you purchased your bag at the place of origin in Paris rather than at a branch in Tianjin.
The Chinese National Tourism Administration noted that in 2010, more than 57 million Chinese traveled abroad and spent US$48 billion at overseas destinations, a figure that is expected to grow 17 percent annually over the next decade.
Key forces behind this growth include increasingly convenient transnational payment methods and a stronger Chinese currency, which have made outbound tourism and associated overseas purchasing easier and cheaper.
In the summer of 2010, when the yuan was at its strongest against the euro, LV France burned through three months of inventory in just one month. As a result, through the end of November, LV was forced to limit to two the number of leather goods customers could purchase daily so that the store could save stock for the Christmas season.
In addition to their numbers, the shopping habits of this large new consumer group differ greatly from those of LV's traditional customers. More than 95 percent of Chinese tourists arrive on tour buses, leading to a quick spike in customer volume and posing a challenge for staff charged with providing premium service to each individual shopper.
Also, while LV has traditionally posted its strongest sales during the fourth-quarter Christmas shopping season, the increase in Chinese consumers shopping abroad has caused sales to shift heavily toward the weeks leading up to the Chinese Lunar New Year in late January or early February, resulting in a massive spike in sales in the first quarter.
Blistering Chinese demand, combined with factors such as purchasing limits and the high luxury tax at home, has also led to the growth of a large gray market for LV products.
Managers at LV's Galeries Lafayette location were recently dismayed to learn that the two young Chinese women who held the top two spots on their VIP list, each spending more than 500,000 euros (US$700,000) per year, were selling them at a profit on Taobao.com, China's version of eBay.
Adapted from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://bit.ly/x9OHS1.
This is the second and final part of an article from Wharton Business School on why many Chinese luxury shoppers like to buy overseas.
Many Chinese consumers prefer to shop outside China because they believe that the luxury shopping experience is better abroad due to superior customer service and a greater selection of brands.
Furthermore, traveling has become part of the luxury lifestyle in China and is considered a status symbol: There is greater cachet in being able to say you purchased your bag at the place of origin in Paris rather than at a branch in Tianjin.
The Chinese National Tourism Administration noted that in 2010, more than 57 million Chinese traveled abroad and spent US$48 billion at overseas destinations, a figure that is expected to grow 17 percent annually over the next decade.
Key forces behind this growth include increasingly convenient transnational payment methods and a stronger Chinese currency, which have made outbound tourism and associated overseas purchasing easier and cheaper.
In the summer of 2010, when the yuan was at its strongest against the euro, LV France burned through three months of inventory in just one month. As a result, through the end of November, LV was forced to limit to two the number of leather goods customers could purchase daily so that the store could save stock for the Christmas season.
In addition to their numbers, the shopping habits of this large new consumer group differ greatly from those of LV's traditional customers. More than 95 percent of Chinese tourists arrive on tour buses, leading to a quick spike in customer volume and posing a challenge for staff charged with providing premium service to each individual shopper.
Also, while LV has traditionally posted its strongest sales during the fourth-quarter Christmas shopping season, the increase in Chinese consumers shopping abroad has caused sales to shift heavily toward the weeks leading up to the Chinese Lunar New Year in late January or early February, resulting in a massive spike in sales in the first quarter.
Blistering Chinese demand, combined with factors such as purchasing limits and the high luxury tax at home, has also led to the growth of a large gray market for LV products.
Managers at LV's Galeries Lafayette location were recently dismayed to learn that the two young Chinese women who held the top two spots on their VIP list, each spending more than 500,000 euros (US$700,000) per year, were selling them at a profit on Taobao.com, China's version of eBay.
Adapted from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://bit.ly/x9OHS1.
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