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Chinese Tourists Spur Luxury Goods Sales

Chinese travelling abroad are offering a welcome fillip to the growth in sales of luxury goods in developed nations. Because of the nation's economic development there are now greater possibilities for overseas travel.

A survey conducted by Goldman Sachs Global Investment Research, an independent market research company, reveals around 20.2 million Chinese people travelled abroad in 2003.

And several industry analysts expect this number to increase dramatically as more foreign countries become approved tourist destinations and as Chinese people generally attain greater disposable incomes.

The Economist Intelligence Unit expects Chinese travellers to increase to 49 million by 2008, 60 million by 2010 and 100 million by 2015.

The World Tourist Organization also expects the figure to reach 100 million, but over a longer period of time, by 2020.

In the first 10 months of last year, 23.84 million Chinese travelled abroad, a year-on-year increase of 49.8 percent.

The surge in Chinese travelling overseas is good news for luxury brands, because Chinese people show a high propensity to spend when travelling and travelling will enhance their brand awareness, the survey said.

In the short term, Hong Kong is likely to attract most of the spending on luxury goods by the mainland tourists because of its proximity to the mainland and attractive pricing. But Europe, particularly France and Italy, will also lure a significant number of Chinese shoppers.

The survey indicates that Chinese shell out at least twice as much on luxury commodities when touring overseas than they would locally, attributing this phenomenon to three factors:

First, Chinese consumers are generally price conscious, and consumers of luxury goods typically seek the lowest price if this is easily identifiable.

Prices of luxury commodities can be at least 20 percent to 30 percent higher on the mainland than in Hong Kong or Europe as a result of high import tariffs and consumption taxes.

Tariffs can be as high as 35 percent on certain jewellery on the mainland market, ranging from 12 percent to 16 percent on watches and 10 percent on leather goods; the consumption tax on non-essential items is 10 percent.

Second, gift-giving is an important aspect of Chinese culture. When travelling, they tend to bring back gifts representative of the countries they have visited, often branded products otherwise inaccessible in China, In addition, in the business world, buying expensive gifts is a common and accepted practice and is seen as a way to show respect.