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Mainland Chinese shoppers are bolstering prospects for luxury European brands like Milan-based Prada. Photo: Bloomberg

Le Chinese tour de luxe

Europe's luxury boutique staff polish up their Putonghua as groups of Chinese tourists shun museums and make a beeline for the shops

BLOOM

Move aside Mona Lisa. More Chinese visitors are headed to Paris and they are picking luxury stores such as Galeries Lafayette over visits to the Louvre.

Europe will be among the top destinations for the 94 million mainland Chinese who are expected to travel abroad by 2015, according to McKinsey & Co. Their tour-group itineraries are showing day-long trips to luxury outlets - squeezing short visits to the Eiffel Tower and Louvre museum in between.

By turning their holidays into lengthy shopping excursions, the Chinese are propping up European sales and aiding the outlook for brands from Prada to Gucci, even as the euro zone faces a second year of economic contraction. Close to a third of Chinese luxury buyers will shop in Europe in 2013, McKinsey estimates, up from a fifth last year.

"Consumption is happening more and more outside than within China," said Erwan Rambourg, HSBC's head of consumer and retail research in Hong Kong. "It's cooler to say you bought a Vuitton handbag in Paris than in China."

At Harrods department store in London's upscale Knightsbridge district last summer a sign welcoming Chinese visitors was prominently displayed at the entrance, and some employees milled about wearing badges that asked "Can I help you?" in Chinese. London-based Burberry had doubled the number of Putonghua-speaking staff in Europe in the past 12 months, chief financial officer Stacey Cartwright said.

"We have a love story between us and the Chinese," said Desiree Bollier, chief executive of Value Retail, which has nine Chic Outlet "shopping village" outlets in Europe selling brands from Dolce & Gabbana to Jimmy Choo.

That's hardly surprising when Chinese visitors to Europe, Hong Kong or Singapore spent €11,000 (HK$113,670) on shopping per trip, according to a survey published last year by Global Blue, the world's biggest operator of tax-refund points for tourists. Chinese buyers now account for a quarter of global luxury spending, from 10 per cent three years ago, according to a September HSBC Global Research report.

Value Retail opened its centre in Madrid two hours early to cater to a group of 1,500 Chinese tourists, and added faster choices such as pasta and salads in its restaurants after noticing that mainland visitors didn't want meals eating up shopping time. Now, the company is decorating for next month's Lunar New Year holiday.

Helping drive the overseas purchases are China's import taxes on luxury items and added rebates on European taxes available to non-residents. The cost of 20 luxury items in China, including bags and watches, was 72 per cent higher than in France and 45 per cent higher than in Hong Kong, according to a 2011 survey by the Ministry of Commerce. Chinese from richer cities are also picking Europe and the US over nearby Hong Kong as they seek out new experiences, according to UBS Securities.

"If you travel to Hong Kong three times a year and you've done that for the past three years, you probably feel your next trip should be somewhere else," UBS analyst Spencer Leung said.

Less affluent shoppers, who preferred smaller items such as belts and small handbags, were filling Hong Kong's void, he said. Almost three million Chinese visitors a month arrived in the city of seven million people, government data show. "There are too many tourists shopping in Hong Kong these days," said Summer Xia, a 35-year-old finance executive from Zhejiang province who travels at least once a year to Europe or the US to shop. "I can save up to 40 per cent on some luxury items."

Xia said she spent as much as 300,000 yuan (HK$373,800) a trip, and past purchases included Harry Winston diamond jewellery and an 80,000 yuan red Hermes Birkin bag.

Chinese visitors like her will contribute about a third of luxury sales in Western Europe this year, Credit Suisse Group forecasts. That is helping to insulate the industry from a second year of economic contraction in the euro zone, forecast by the World Bank at 0.1 per cent.

Milan-based Prada's sales rose more than 40 per cent in Europe in the first nine months of last year, double the pace of the company's Far East and China regions. Louis Vuitton sales rose 9 per cent in Europe between January and September, outstripping Asia's 5 per cent.

Prada's Hong Kong-listed shares surged 53 per cent in the past six months. In Paris, LVMH Moet Hennessy Louis Vuitton gained 20 per cent; PPR, the owner of Gucci, jumped 43 per cent.

Chinese tourists' shift toward Europe, which started last year, is "quite an established trend at the moment", Prada chief executive Donatello Galli said.

This article appeared in the South China Morning Post print edition as: Le Louvre? Non, Le Vuitton!
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