81% of Affluent Chinese male shoppers in the U.S. receive “Disappointing” service while shopping, study founds

Asian couple in streetThe Shanghai Travelers’ Club magazine, China’s leading luxury travel magazine for High Net Worth global Chinese travelers, launches a new monthly regular section about Men’s Fashion.

“As Chinese entrepreneurs are becoming more and more international, they are more attentive to their personal style while in business meetings or in corporate events” said Pierre Gervois, Publisher and Editor-In-Chief.

The newly appointed Men’s Fashion Editor, Tyron Cutner, will be in charge of this new editorial feature.  An expert in men’s fashion, Tyron Cutner is a well known fashion adviser in New York City and will bring his expertise and style to the publication.

“I feel proud to be part of the prestigious Shanghai Travelers’ Club magazine. Every month, we’ll share with our Chinese readers the latest trends in Men’s fashion and accessories, as well as the basics that every international gentleman must have in his suitcase when traveling”, said Tyron Cutner.

Every month, starting in September 2015, the Shanghai Travelers’ Club magazine will feature a section providing fashion advice for the modern, style conscious, Chinese businessman.  Wether he’s attending a negotiation meeting in New York City, at a Charity ball in London, or attending a gala dinner in Paris.

Advertisement Banner Gervois Hotel Rating - May 2017 featuring Pierre GervoisAccording to a survey by China Elite Focus, 74% of Chinese male entrepreneurs and top executives aged 30 to 45 agree that paying attention to their personal style has a positive impact in conducting business.  And a staggering 81% think that they receive a “Disappointing” or “Very disappointing” welcome when shopping in the United States.

“It’s also important that fashion brands realize that they need to substantially improve the way they interact with affluent Chinese customers in the United States. We hope that this new editorial content will encourage U.S. retailers to implement long awaited changes in the customer service towards Chinese travelers”, Pierre Gervois added.

The Shanghai Travelers’ Club magazine is a China Elite Focus Magazines LLC publication withg offices in Hong Kong, Shanghai and New York City.

Social Media & Shopping Influence for Chinese tourists

Chinese shoppers spendingXiaoyan Mao had not yet collected her luggage after landing at Charles de Gaulle Airport from Shanghai recently. But she and a friend were already mapping out a game plan for the three days they would spend in Paris before continuing a 10-day European blitz with additional stops in Switzerland, Italy and Germany.
Their to-do list included visiting the Louvre and the Eiffel Tower. But what were they looking forward to most on their first trip to the region?
Ms. Mao, 28, a sales manager, smiled broadly. “Chanel,” she said. “Prada.”
Tourists like Ms. Mao are part of a growing wave of newly affluent Chinese taking advantage of more direct flights to the shopping capitals of Europe. The Lunar New Year holiday is now underway, a time when a big part of the 110 million Chinese expected to travel abroad this year will be packing their bags — and their wallets — for luxury expeditions.
And purveyors of European luxury brands, anticipating the arrival of this important clientele, stand ready to embrace it, whether by offering guided tours, in Mandarin, of flagship showrooms; providing backstage access to couture runway shows; or engaging in a variety of other flourishes tailored for the Chinese tourist-shopper.
Storied European brands like Burberry, Hermès and Dior can be bought in high-end shops and shopping malls of major Chinese cities, of course. But for reasons including higher taxes in China and lower prices in Europe, Chinese consumers, who buy more luxury products than shoppers of any other nationality, prefer to do their buying abroad. Of the more than $80 billion in Chinese purchases of personal luxury goods last year, two-thirds were made outside China.
Flagging demand in China itself was a factor cited last week by the Paris-based LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods group, for the company’s flat profit last year. That is all the more reason the company and many of its peers are starting to plow more money into European showcases and shift investments away from the Chinese mainland.
Last year, for example, Louis Vuitton opened a three-store, 10,000-square-foot “townhouse,” complete with spinning glass elevator, atop a Selfridges department store on Oxford Street in London.
“There is a major shift happening now with brands,” said Manelik Sfez, head of marketing for Global Blue, a tax-refund company in Geneva that tracks luxury purchases. “They are starting to reconsider their whole structure and the ways they market themselves.”
In catering to the Chinese shopper, some European makers of luxury goods seek to leverage their brands’ heritage and savoir-faire by conducting tours of their landmark European stores — or even setting up museums in them, as Vuitton has done with its “Espace Culturel” on the Champs-Élysées in Paris. Others organize invitation-only demonstrations of the craftsmanship that goes into the products, which companies and analysts say holds a particular appeal for Chinese visitors.

Gieves & Hawkes, the 240-year-old London tailor, for example, lures Chinese groups away from the bustle of Bond Street to its store at 1 Savile Row, which houses an extensive archive of royal and military regalia dating to the 18th century. The visit, which is translated by a Mandarin-speaking guide, includes a stop in the store’s bespoke workshop, where the company still hand-sews 1,000 suits a year.
“In terms of seeing all the components of a luxury brand, it is very immersive,” said Simon Baker, marketing director for the company, which has more than 100 stores in China. “Our Chinese guests are looking to learn what being dressed by a Savile Row tailor is all about, and why it is more luxurious and prestigious.”
The Italian design house Ermenegildo Zegna works with boutique travel agencies, and hotels favored by affluent Chinese, to offer V.I.P. tickets and backstage passes to its European fashion shows.
Zegna has also followed brands like Louis Vuitton and Burberry, already active on the social media platform Sina Weibo, in creating an official account on the wildly popular mobile messaging service Weixin — known outside China as WeChat . So has Harrods, the London department store, which counts Chinese visitors as its largest foreign customer group.
Such efforts are part of the image burnishing that analysts say is as important in marketing to these visiting consumers as selling individual wares.
A Chinese tourist who returns home with a memorable experience to share can be a powerful ambassador for a brand, said Philip Guarino, co-founder of the consulting firm Emerging Market Luxury Advisors.
“You are dealing with a demographic, not a geography, so you need to think in nongeographic terms,” Mr. Guarino said. “Some brands have 150 store locations in China alone,” he said. “But their cash registers are in Europe and the United States.”
Just how dependent the European luxury sector has become on Chinese visitors became starkly evident late last year. In October, China passed a consumer-protection law prohibiting travel agencies from subsidizing group tours to Europe by including mandatory stops at high-end department stores like Galeries Lafayette in Paris or La Rinascente in Milan.
Beijing considered the practice — whereby mass-market agencies used commissions from retailers to offset deeply discounted package tours — to be misleading. Mr. Sfez, of Global Blue, estimated that before the law changed, such captive buying represented roughly 40 percent of all Chinese luxury purchases in Europe.
The law had a striking effect on Chinese tourists’ luxury spending in the fourth quarter, halving sales growth across the European Union to 9.5 percent compared with growth rates of 20 percent or more in the preceding three quarters of last year.
But analysts do not expect a reversal of the broader trend, because higher prices in China compel so many Chinese to prefer shopping overseas. Luxury handbags, which might sell for $1,000 to $5,000, cost on average nearly a third less in Europe than in mainland China, according to Renaissance Capital, a Russian investment bank. Markups by Western brands are common in China, where foreign companies must navigate a thicket of red tape to do business and pay high rents for premium retailing space.
The price gap is further widened by China’s high taxes on consumers. On top of an import duty of 10 percent, Beijing levies a value-added tax of 17 percent and sales taxes that can range from 5 percent to 20 percent, depending on the item. Some other Chinese cities add taxes as well.
Foreign visitors to the European Union who spend more than 175 euros, or $236, in the same store on the same day, meanwhile, are entitled to a rebate on the value-added tax, which in most member states hovers around 20 percent.
Chinese consumers’ embrace of the Internet and social media platforms like Sina Weibo has also increased access to information about luxury goods abroad, allowing them to comparison shop before they even board a plane. Applications like Weixin let people share their foreign shopping experiences in real time, check prices and send photos as they weigh their purchases — or even take orders on behalf of friends back home.
Digital travel magazines, such as the Shanghai Travelers’ Club, have also their Sina Weibo page and publish a curated content about little known luxury brands, as well as tips on how to purchase a private jet or a private island.
Armed with these digital tools, a growing number of Chinese travelers, particularly younger ones, are forgoing the classic group tours and venturing abroad independently. That trend, with the ban on commission-subsidized tours, is driving more tourists to explore beyond the big European flagship stores in the fanciest districts, analysts said.
It also exposes entrenched legacy brands to intense competition in China from increasingly popular rivals like Bottega Veneta of Italy or Mulberry of Britain.
That means the bigger design and fashion houses will need to be more nimble than ever in adapting to the changing habits of their Chinese clientele, according to Federica Levato, a luxury analyst in Milan at the management consultants Bain & Company.
“If they don’t catch up quickly, they will become less competitive,” Ms. Levato said. “Just as they anticipate fashion trends, they now have to anticipate changes in consumer behavior.”

Source: New York Times

Will cuts on luxury goods taxes in China prevent Chinese from shopping abroad?

Last year Chinese tourists bought almost two-thirds of luxury goods sold in Europe as they went on a record spending-spree. But while mainlanders are happy to splurge on foreign soil, what their government needs is for them to open the purse strings at home. Domestic consumption has shrunk to just 36% of gross domestic product and is increasingly the weak link in China’s growth.
One step to redress this spending imbalance is to cut penal mainland taxes on consumption and luxury goods. Analysts say such a move now looks likely.
This could have far-reaching consequences for one of the biggest investment stories of recent years — outbound spending by mainland tourists.
Everyone from retailers in Hong Kong, to London or Seoul could feel the fallout, while foreign luxury brands seeking to expand in China should be buoyed by any duty cut.
Expectations that a move is imminent were fuelled by widely reported comments earlier this month by former deputy commerce minister Wei Jianguo, to expect at least two rounds of reductions on import taxes on consumer and luxury goods. Then, this past weekend Finance Minister Xie Xuren promised to improve China’s consumption tax.
Chinese shoppers in ParisAmong the spending habits likely to catch authorities attention say Credit Suisse is the revelation that Chinese residents spent 300 billion yuan ($47.4 billion) overseas on their bank cards in 2011, up 66.7% on a year earlier, according to data from China UnionPay.
And as well as accounting for 62% of all luxury consumer sales in Europe last year, mainland shoppers spent a whopping $7.2 billion during the recent Lunar Year holiday, up 28.6% on the previous year according to the World Luxury Association.
If you look at existing tax rates in China, it is easy to see why shopping overseas is so popular.
Import duties on general luxury products range from 10%-25%, and can be as high as 35%-60% on luxury cosmetic products and alcohol. Add on value-added tax (17%) and a consumption tax depending on the merchandise and prices on the mainland are penal. According to a survey by the Chinese Ministry of Commerce, prices for luxury goods in China are 45% higher than in Hong Kong, 51% higher than the U.S. and 72% higher than France.
If these taxes were designed to promote social fairness and curb bourgeoisie shopping habits by targeting rich consumers, they appear to be missing the mark — luxury spending at home is just being diverted overseas by globe trotting mainlanders.
Another reason to expect action on taxes is the government’s recent focus on boosting growth through domestic consumption. This past weekend in Beijing Vice Premier Li Keqiang said expanding domestic demand is a “strategic point” for economic development. Another official played up China’s readiness to import, predicting it may soon become the world’s largest importer.
This eagerness to import, however, comes at a time when China just recorded a monthly trade deficit in February of $31.5 billion. With export growth expected to remain relatively weak, this provides another reason for authorities to be less sanguine about yuan leaking abroad through unchecked tourist spending.
Meanwhile, it is also worth considering that for many mainlanders, shopping abroad is not just about getting a tax-free bargain.
China’s capital controls and limited domestic investment options mean luxury shopping often fulfills various secondary needs.
In Macau, for instance, purchasing luxury goods can be a handy way to access hard cash. A typical story is a mainlander shopper can buy an expensive handbag or watch on their credit card, which can then be sold back for something like 90% of the value in cash.
In fact, luxury handbags have almost become a money substitute. Milan Station Holdings Ltd. , a chain of shops that trades second-hand handbags even listed on the Hong Kong stock exchange last year, which gives you an idea how big this business is.
This, as well as a preference by many mainlanders to conceal conspicuous luxury shopping overseas, means old shopping habits could be hard to change.
If we do get a cut in luxury taxes, Credit Suisse, say luxury brands who import their goods into China will benefit such as Prada, Coach, Hugo Boss, LVMH or Tiffany.
The flip side, they add, is that for the retail and tourism industries that have benefitted from outbound Chinese tourists, any reduction in import tariffs will be incrementally negative.
But according to China Elite Focus, a Shanghai-based marketing and research firm specialized into reaching to affluent Chinese outbound tourists, these tax modifications will have small impact on the behavior of Chinese shoppers “Buying abroad luxury goods is first and foremost a sign of social status” said Pierre Gervois, China Elite Focus’ CEO. He added “ The fact that Chinese buyers will pay less their luxury goods if they buy in the U.S. or in Europe is a minor factor compared to the prestige of having bought a Tiffany diamond in New York City or a Louis Vuitton bag in Paris”
On the list of potential casualties is Hong Kong, Macau, South Korea to retailers in Europe. Hong Kong could be particularly vulnerable given 28 million mainland tourists visited last year (four times its population) and its huge concentration of luxury retail brands — Louis Vuitton has seven stores in the city, one more than Paris.

Source: The Wall Street Journal, Article by Craig Stephen

Are “Luxury shopping tours” the future of luxury retail in China?

Chinese customers seem to have (relatively) deserted luxury flagship stores in Shanghai, but they are at the same time rushing into the same flagship stores in Paris, London, or New York. Is that a new trend? Who will be the winner?  Luxury industry or Travel industry?

We would like to thank all contributors for their participation to this collective article. This discussion has been started on May 17, 2010, and ended on June 4, 2010, on the professional blog “Luxury Society”.

Pierre Gervois Living in Shanghai I can see nearly every month a new flagship store bigger than the previous shops for brands such as Cartier, Louis Vuitton, Piaget, Chanel…
The problem is these shops are nearly empty. Between my home and my office, I can see directly a dozen of these flagship stores every day when I’m in the taxi. And I rarely see a Chinese customer inside… Most of the time, I can witness the staff looked really bored in these luxury, empty shops.
Obviously, the big groups (Richemont, LVMH, PPR…) have seen too big. The demand is very far to be what they have expected, probably based on false statistics on the consumption capacity of the Chinese consumers.
What is your opinion, specially if you live in China ?

Timothee Semelin Actually, I would say I was thinking the same thing a couple of years ago about the Beijing flasgship store scene. 
Then after I get to know more and more people in the luxury retail and working directly with some brands, what we can say is that the huge amount of money those brands make are not coming from the outstanding number of clients they have but more on the few BIG clients that they have .
On a one shot shopping that could spend hunderd of thousands of RMB and thus, those shops do not need many clients for now.
Plus those BIG clients may spend their time in the VIP area of the shops that you won’t see from outside the shop and I am not talking about the private sales… A flagship store is not always the key shopping place.
The question is how long this will last, because the BIG clients will have more and more brands to choose from and at some point, brands will also need more casual shopping people. when will they reach their turning point?
You should read this:http://thechinaobserver.com/2010/05/what-are-chinas-luxury-consumers-buying/

Pierre Gervois Many thanks for your very interesting comment. Yes, there are some private and discreet sales, but not that many. The biggest Chinese spenders will go directly to Paris, Geneva of NYC to buy the most expensive pieces. This is actually a big isue for luxury brands. They have not anticipated that Chinese consumers wuld travel abroad so easily for luxury shopping. 
In my opinion, the future of luxury retail for Chinese consumers is in “Luxury shopping travel”…

Timothy Coghlan Another two reasons for the big (albeit empty) flagship stores are as follows:
Prime real estate for luxury stores is running out fast in Shanghai, as it is in Beijing and already has run out in Hong Kong. Therefore brands are snatching up locations now before they run out even if it means operating at a loss for a few years.
The other reason is that they are simply acting as a ‘flagship’ that looks big and very pretty and gets noticed and lots of press. In this case the stores are more for show and prime streetside advertising space than as a revenue earner. Its essential for the brands to have presence in the big cities, but they often make most of their revenue from 2nd and 3rd tier cities, where the consumers are wealthy but not so sophisticated and prone to overseas travel.

Mireille Weber I have noticed that in Shanghai : luxury stores in beautiful malls , always empty, and staff yawning all day long.It is the other way round in Hong Kong!  We also know that the leases are quite expensive : between 150 000 and 180 000 RMB. per month if not more…. 
I guess it is part of the luxury brand’s strategy, they all have to be in Shanghai nowadays for obvious reasons. I do not agree with you : the demand is there, but most of the Chinese fly to Hong Kong to buy those items ( I am talking about luxury perfumes, my field), 
the import taxes in mainland China are too high + in Hong Kong, they are pretty sure to buy the real thing.

Ahn’na Hargrove Just finished our most triumphant supercar show in Monaco. We had partnership with The Hurun Report who brought one of their listed clients. He said that they preferred luxury travel and are the number 1 spenders in Paris at the great luxury stores. Buying in China for the richest doesn’t provide the international clout they have when travelling abroad.
Everyone at the show loved them and sought them. They loved the publicity and the cameras on them as they shot from one supercar to the next. It’s about time!

Felice Jiang I would agree that luxury travel is a major reason why those storefronts may be empty, and that it is not an issue with demand. We’ve covered outbound Chinese tourists extensively, with most predictions showing that they will be on the rise. As much as 75% of Chinese Businessmen are planning to travel even more this year. 
We also reported recently about the results of a survey, that 50% of luxury purchases were intended as gifts, likely a result of the loosening of travel restrictions and an increase in “shopping tourism.”
For the complete article: 
http://www.jingdaily.com/en/luxury/50-of-luxury-purchases-by-chinese-in-2009-were-gifts-survey/

Emilyn Lee Having store front = brand visibility and presence.
Brands that want to make an impact, giving an impression of having strong fundamentals and brand heritage, often go with a large store presence in key locations.
Besides, out of sight = out of mind.

Pierre Gervois Thank you for all these very interesting comments and analysis. Luxury travel is maybe the future of luxury retail for wealthy Chinese consumers…

Timothy Coghlan There is another reason I forgot to mention which is the malls will agree to a percentage of revenue (usually 5% or less) only as rental fee. For the top 10 or so luxury brands, developers will also pay 3000-4000 Euros per square metre fit out fee for the stores. Therefore the the top luxury brands get the store built for them and only have to pay a percentage of what they make.

Amalia Agathou What a great thread! Thanks everyone for the insights, I find the Asian market fascinating!

Jerome Mackay Yes, a great thread indeed! 
I must add that hearing about all these huge flagship stores does put off smaller brands who somehow get the impression that these big empty shops are the only way to do business in China and that it’s extremely costly. 
Surely there must be some smaller and successful operations too?

Alexandre Niepce Yes what an interesting subject and constructive insights! 
Living in Shanghai too for two months now, my point of view is that biggest Luxury Brands may have entered the game to easily and have omitted to elaborate a deep strategy to reach a maximum of customers. The Chinese market is much more complex than it first seems and even if the potential is there, huge and customers ready to buy, some key elements have to be taken into account: time, trust, culture understanding… Chinese market is also not waiting for us to undertake it but already shows signs of self development.

Pierre Gervois Yes, Alexandre, you have perfectly understood the core issue : Culture understanding. Major Foreign luxury brands have still a lot to do…