China Consumer

Holiday handbags

Why Golden Week is golden for luxury brands

Shopping offline...

Anyone visiting Hong Kong in the first week of October hit peak shopping season. For some of the high-end boutiques there were queues to get in. The flagship Chanel, Gucci and Louis Vuitton stores in Tsim Sha Tsui drew long lines of customers that had to be managed by rope barriers and doormen.

It was China’s Golden Week – a seven day holiday coinciding with the October 1 National Day. That meant an influx of mainland Chinese visitors to the city, many of whom spend much of their time shopping. Hong Kong recorded an increase of as much as 60% in retail sales on the same period a year ago, says the Hong Kong Retail Management Association.

Hong Kong has no sales or luxury taxes. That means luxury goods can be as much as 30% cheaper than across the border. Shoppers also say that there is a better selection of goods available. This helps explain why Chinese consumers continue to make more pricey purchases abroad than at home (only 40% of luxury goods Chinese buy are estimated to be bought in China itself).

Taking a cue from the cross-border bargain hunters, many freelance importers now offer to bring in goods from places like Europe to avoid China’s stiff import duties. Websites like Taobao.com, the country’s largest online marketplace, are now full of listings of overseas students offering to bring luxury items back to China, says Jing Daily.

Qiu Qiu (a pseudonym), a freelance importer, told the Southern Weekend that she provides shopping services for clients unable to travel to Europe. She generally takes a commission of between 8-10% on the cost of the goods.

The savings from shopping abroad can be decent ones: “Take a Chanel shoulder bag. It costs about Rmb20,000 if you buy one from a specialty store in China; if you go to Hong Kong you pay about Rmb18,000. But when you buy from overseas it costs only Rmb15,000 even after the extra charges.”

The challenge is how to bring the goods back to the mainland. Often, Qiu says, she relies on “friends” – tourists or airline flight attendants – to hand-carry them (they are paid a small commission). The risk is that, if caught by customs, the smuggler is fined and charged for the full duties. Worse, the goods might be confiscated.

Owners of Apple products seem to have encountered some cross-border difficulties of their own this week, according to the South China Morning Post. The Hong Kong newspaper says several people have reported being forced to pay taxes for carrying iPhones and iPads across the border even if the products were out of the box and in use. A notification on the official customs website says iPad and iPhone carriers can expect to be charged a 20% border tax – as bureaucrats seek to crack down on smuggled Apple gadgets.

All that said, Qiu said her business is still a lucrative niche. Many of her clients also hire her because she knows where to look for limited edition items that are not currently available in the Chinese market.

Still, another option for savings on luxury items are websites specialising in cut-price products. 5lux.com (the company’s Chinese name is Fifth Avenue) targets urban women with high incomes. The business model is simple: the site buys mostly overstocked clothing and accessories from brand-name designers, and then discounts them. A Prada transparent PVC handbag is being sold at a discount of 42%; Gucci sunglasses are going for 50% off.

The business model works for luxury-goods manufacturers too, in offering a way to offload end-of-season merchandise quickly without sullying their image. Considering China’s penchant for counterfeiting nominally high-quality branded items, Sun Yafei, founder and chief executive of 5lux.com, says trust is still a big issue. To that end, the website offers tips from experts on how to distinguish knock-offs products. It also provides a free-return service for disgruntled customers. So far, says Sun, she hasn’t received any complaints.


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