In recent months, Chinese shoppers have found themselves waiting in long lines, perhaps exchanging shopping tips, in Tokyo, Osaka and Kyoto, where they were able to purchase luxury goods at unprecedented prices.
As the Japanese yen sank to a 34-year low against the dollar, price differences for luxury goods between mainland China and JapanĀ haveĀ almost reached the highest level in 18 months, according to data from Luxurynsight, a Paris-based consulting agency.
āThe fall in the yen brought luxury brands to be even less expensive in Japan [for Chinese shoppers] than in Paris,ā observed Luxurynsight founderĀ Jonathan Siboni, who believed travel retail was one of the mainĀ reasonsĀ why LVMH MoĆ«t Hennessy Louis Vuittonās sales grewĀ 32 percent in Japan during the first quarter.Ā In stark contrast, organic revenue in Asia, which China dominates, declined 6 percent year-over-year in the same quarter.
According to Ctrip, Chinaās largest online booking platform, Japan was the most popularĀ travelĀ destination for outbound Chinese travelers during the most recent May Day holiday.Ā OtherĀ popularĀ destinations includedĀ Singapore, Thailand, South KoreaĀ andĀ the U.S. According to data from Chinaās Ministry of Culture and Tourism, 4.8 million Chinese residents traveled abroad during the five-day holiday, up 38 percent year-over-year.
Chinese tourists visiting the Kiyomizu-dera Temple during the May Day holiday on May 2, 2024 in Kyoto, Japan.
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Louis Vuitton, Chanel and Van Cleef & Arpels were among the most popular brands mentioned by Chinese shoppers on Xiaohongshu, the Chinese social commerce platform.
According to Luxurynsight, Chinese shoppers can save up to 25 percent after a tax refund by buying in Japan. For example, a Chanel Classic Flap is 10,640 renminbi, or $1,472,Ā cheaperĀ in Japan compared to the Mainland market; a popular Louis Vuitton carryall is around 4,900Ā renminbi,Ā or $678,Ā cheaper; the Miu Miu Aventura handbag, a The Row Margaux-adjacent style, can be bought at 9,204 renminbi, or $1,273, less, andĀ a Van Cleef & Arpels Alhambra bracelet is 10,303Ā renminbi,Ā or $1,426, less.
The hashtag āLV shopsĀ are filledĀ with Chineseā dominated Weibo trending topics during the national holiday, garnering more thanĀ 8.7 millionĀ clicks on the Chinese social media platform. āThe Louis Vuitton bag is the best souvenir Japan has produced so far,ā wrote one Chinese netizen.
At Japanese department store Takashimaya, some eager consumers waited all night to be the first to shop at Louis Vuitton, according to posts shared on Xiaohongshu.Ā Some trekked to stores in smaller tourist destinations, such as Kobe and Nara, to avoid long lines.Ā In the Japanese market,Ā Louis VuittonĀ hasĀ 55 stores, compared to around 53 in mainland China.
Chinese tourists wait in line outside a Dior store in the Ginza district in Tokyo, Japan.
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According to Barclayās Wendy Liu, renewed consumer interest in top-tier luxury brands reflects a more value-driven Chinese consumer mindset.Ā
āPeople are taking less risk in terms of the brands they shop, theyĀ want to buy brands that hold value,ā said Liu. āThey think HermĆØs and Louis Vuitton hold valueĀ a bitĀ better than some of the aspirational, more fashion-ended luxury brands.āĀ
According to data from the Japan National Tourism Organization, more thanĀ 1.3 million mainland Chinese travelers visited Japan in the first quarter, up 826 percent year-over-year.
ChineseĀ shoppersāĀ average spending reached 293,100 yen, or $1,884, the highest among vacationers.
āItās a perfect storm for travel retail in Japan, with favorable exchange rates,Ā tax refunds and exceptional retail services,ā saidĀ England Summers, a Tokyo-based brand strategist.Ā āItās also a plus that Tokyo has so much to offer with its rich culture; itāsĀ not just about shopping for these Chinese travelers.ā
Even though luxury players rarely produced spectacle runway events in the Japanese market in recent years, they have quietly acceleratedĀ regional retail expansion plans to accommodate affluent Chinese shoppers.
In 2021, Louis Vuitton opened twoĀ flagships, one in Ginza and another in Osaka; in March, HermĆØs opened a new stand-alone store in Azabudai Hills.Ā Last month,Ā Balenciagaās second Ginza store bowed in the newly opened Toraya Ginza Building.Ā Last October, Tiffany & Co. opened a flagship in Omotesando; the same month, Boucheron opened its second-largest flagship in Ginza.
Balenciagaās new Tokyo flagship.
Courtesy
To lure Chinese shoppers, retailersĀ are hiringĀ more Chinese-speaking staff and have taken to Chinese social media to communicateĀ with Chinese netizens directly.Ā
Ginza Six, a top-selling luxury department store in Tokyo, recently launched its official account on Xiaohongshu, the popular social commerce platform. Its first post, which introduced a space-themed art installation byĀ artistĀ Kenji Yanobe, quickly garnered more than 400 likes. On WeChatās Mini Program, Shiseido recently introduced a digital travel guide called āGuanmei Japan.āĀ
A screenshot of Ginza Sixās first Xiaohongshu post.
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Facing lower-than-expected economic growth in China, Barclays expects the local luxury retail market to expand by zero to 5 percent in 2024, a slightly more optimistic view than previously.Ā
āChinese shoppers are more prudent with where they spend their moneyĀ for sure, but itās different from being strapped for cash,ā explained Summers.Ā
For Siboni, whether brands should increase investment in China or Japan depends on the percentage of destination purchases that were impulse buys and the percentage that were more premeditated.
āIf plannedĀ in advance, brands should increase marketing budgets in China. If itās an impulseĀ buyĀ in Japan, they should rather focus on increasing brand distribution in Japan. In reality, it is more a mix of both,Ā which reinforceĀ each other in a virtuous circle,ā explained Siboni.Ā
āThe challenge today is thatĀ we cannot distinguish communication and distribution anymore,ā added Siboni. āFor example, when brands do livestreaming, part is for brand equity and marketing, andĀ part results in sales. Which may or may not happen in mainland China.ā