China travel warning spells trouble for U.S. luxury retailers

[beijingwalker]

China travel warning spells trouble for U.S. luxury retailers
BY SARAH MIN
JUNE 4, 2019 / 6:04 PM / MONEYWATCH

• China's new warning discouraging its citizens from traveling to the U.S. will mean fewer free-spending Chinese tourists.
• They account for some of the highest tourism traffic and spending in America.
• A typical Chinese visitor bought $6,700 in goods and services in 2017.
• Luxury retailer Tiffany blamed lower sales in its most recent quarter to dwindling Chinese tourism in U.S.

China issued a travel warning Tuesday discouraging its citizens from traveling to the U.S., the result of an increasingly bitter trade dispute that's now dealing a blow to American luxury retailers dependent on free-spending Chinese tourists.

Chinese visitors account for some of the highest tourist traffic and spending in America. In terms of bilateral trade, travel is the largest U.S. industry export to China, counting for nearly one-fifth of all U.S. exports to the country. Spending from Chinese visitors and students reached $35.3 billion in 2017, according to the U.S. Travel Association.

The typical Chinese visitor to the U.S. dropped an average $6,700 in purchases in 2017 -- about 50% more than the average international visitor. Chinese tourists are more likely to buy high-end consumer goods like jewelry, cosmetics, apparel and electronics.

That extravagant spending has made overseas Chinese visitors highly coveted by U.S. businesses, particularly luxury retailers, which are now getting hurt by the slowdown in travel. Travel from China slipped in 2018 for the first time in 15 years, impeded by a slowing global economy, a strengthening dollar and rising trade tensions.

"It is an undeniable fact that Chinese travel to the U.S. has been a huge win for the U.S. economy and jobs, and there are warning signs that advantage is beginning to erode," Tori Barnes, executive vice president for public affairs and policy at the U.S. Travel Association, said in a statement in response to reports of slowing travel.

25% percent slide in tourism sales
Tiffany said in its earnings report Tuesday that while it performed better than expected, it experienced a 25% slide in tourism sales from the prior year and said the decline was even sharper among Chinese tourists. A bellwether for the luxury sector, Tiffany previously blamed dwindling Chinese tourists in November for a poor holiday season.

It's not the only luxury retailer to point to falling Chinese tourism: Louis Vuitton last year also blamed fewer Chinese tourists for weaker sales. "The Chinese economy is the economy that saved the luxury market after the recession, so it's absolutely critical that the Chinese consumer be healthy," said Luxury Institute CEO Milton Pedraza.

That may mean high-end retailers like Tiffany will follow those consumers to mainland China, where the company is building stores and expanding an online retail presence. Tiffany CEO Alessandro Bogliolo said in Tuesday's earnings call that his company is purposely keeping retail prices for jewelry down in China currently to bolster sales there, despite already getting hit by Chinese tariffs to its jewelry exports.

https://www.cbsnews.com/news/china-travel-warning-spells-trouble-for-u-s-luxury-retailers/

 

[atan651]

No need for any kind of warning. Just stop them from going to the US. Why give billions to the fascist nation and get harassed.

 

[Dungeness]

Chinese tourists will spend big bucks somewhere anyway. If not in the states, they will spend in Europe or Japan.

 

[Philip the Arab]

China will lose revenue if US blocks citizens from going to China.

 

[Hamartia Antidote]

https://footwearnews.com/2019/business/retail/luxury-brands-china-daigou-regulations-1202759317/

This Chinese Law — Not the Trade War — Is Beginning to Hurt Luxury Brands Abroad

Over the past decade, luxury brands have benefited from a boom in Chinese tourists’ shopping abroad, but new regulations that went into effect on Jan. 1 appear to already be putting the breaks on some of this growth.

The laws target the cross-border shopping practice of daigou — independent agents who buy goods abroad and resell them at home for less than they would cost in stores, avoiding the country’s steep taxes. As of the beginning of this year, daigou are now required to register with the Chinese government, obtain a business license and pay taxes on imports that exceed the duty-free limit of 5,000 yuan ($743), part of the administration’s efforts to encourage domestic spending.

New data from the Japan Department Stores Association suggest that the crackdown is already taking a bite out of revenues. Duty-free sales at department stores fell 7.7 percent in January, compared with the same period last year, and average spending per shopper fell 8.4 percent to 63,000 yen ($567). The drop was the first the country has seen since 2016, when China raised its import taxes.

“On top of the slowing Chinese economy, due to the U.S.-China trade war, restrictions on duty-free products [in China] have tightened since the beginning of the year,” reads the retail association’s report, referring to the country’s slowing GDP growth and the ongoing tariff tensions between President Donald Trump and Chinese president Xi Jinping.

An estimated 1 million people worldwide work as daigou, and the market for luxury goods alone is worth between 34 billion and 50 billion yuan ($5 billion to $7.4 billion), according to a 2015 report from consulting firm Bain & Co. For those caught breaking the new laws, the penalties are steep: E-commerce and social media platforms can be fined between 500,000 yuan (about $75,000) and 2 million yuan (nearly $300,000) if they fail to adequately police the practice, and individual sellers can face jail time in serious cases.

According to the Boston Consulting Group, Chinese consumers purchased $121 billion worth of luxury goods in 2018, or about 32 percent of the worldwide total. This share is estimated to grow to 40 percent by 2024.

While the Chinese government has added extra hurdles for those who wish to continue reselling foreign-bought goods, it has also eased regulations around e-commerce, raising the annual duty-free allowance for online purchases to 26,000 yuan ($3,865), from 20,000 yuan ($2,973).