This article was published earlier in our weekly newsletter. Sign up through our “Newsletter Sign Up” box on the right. As tariffs keep luxury goods prices high in mainland China, the trend of Chinese shoppers heading abroad is only getting stronger this year. According to a new report by the China-based Fortune Character Institute, 78 percent of luxury purchases by Chinese consumers took place outside of mainland China this year, a number slightly higher than last year’s estimate of 76 percent. This means that even though China’s domestic luxury market has been in slowdown mode, Chinese consumer spending is still growing globally—total purchases by Chinese consumers rose 9 percent to $116.8 billion, according to the report. It says that most of this is taking place abroad, as purchases outside of China grew by more than 12 percent to $91 billion. It will be important to compare these statistics to those by other firms released in the future, as many research firms often give different estimates. Fortune Character Institute’s estimate of purchases abroad is roughly in line with a similar statistic given by Bain & Company last year that consumers bought 70 percent of their luxury goods from a combination of overseas shopping and daigou purchases online. However, Bain estimated that China’s domestic luxury market shrank by 1 percent last year, while Fortune Character claimed it declined by a staggering 11 percent. Nonetheless, it’s not hard to tell that Chinese shoppers buying items abroad are a major source of both slowing domestic growth and rising international sales for luxury brands. From Europe to Japan (and South Korea as it rebounds from the MERS crisis), Chinese shoppers have kept up with currency fluctuations and sought out the best prices across the world. Unless China drastically reduces tariffs, this trend isn't going anywhere anytime soon. Brands need to think carefully about how to cope with this reality, which includes a combination of pricing policy considerations as well as a solid strategy for reaching the increasingly important traveling Chinese luxury consumer.
