Chinese shoppers flock to Japan to take advantage of weak yen
Chuo Ward, Tokyo, Japan – February 23, 2018; Top luxury shopping streets lined with colorful neon signs. Ginza avenues are lined with expensive brand stores and restaurants in the heart of Tokyo. It is five thirty on a Friday afternoon. People flock to Ginza to shop, dine and drink with friends. Ginza has become synonymous with large shopping districts in Japan.
Marco Ferrarin | Moment | Getty Images
SHANGHAI — Luxury brands are seeing a surge in sales in Japan, thanks largely to shopping by Chinese tourists taking advantage of the weak yen, according to earnings results this month.
LVMH, Kering and Burberry both reported growth, although weaker sales in China weighed on overall results.
Japanese Sales for Kering-owned Yves Saint Laurent jumped 42% in the first half of the year “driven by strong growth in the number of tourists from China and Southeast Asia, who were attracted by price differences arising from favorable exchange rates,” the parent company said Wednesday of its second-largest brand.
In the first half of the year, the luxury goods group LVMH This week reported “exceptional growth in Japan especially arising from Chinese tourist purchases.”
The Chinese Yuan has gained 6.9% against the yen this year after hitting its highest level this month against the Japanese currency in at least 24 years, according to Wind Information data going back to 2000.
Yen has fallen 38-year low against US dollar because the interest rate differential between the Federal Reserve and the Bank of Japan remains large.
The number of global tourists to Japan surged in the first half of the year, with South Korea accounting for the most visitors, according to Japan National Tourism Organization.
However, data showed that mainland Chinese visitors saw the strongest growth, jumping 415% in the first half of the year to 3.1 million visitors.
Trip.com Trip.com told CNBC that it has seen an increase in spending from Chinese visitors to Japan in recent months compared to the previous three months. The travel service reported more than 60% growth in both bookings made through its custom travel group and in its global shopping service, which partners with luxury brands around the world. Trip.com did not specify which months, citing upcoming earnings, which are traditionally released in September.
On Chinese social media sites like Weibo and Xiao Hong Shu, users have been sharing tips on luxury shopping in japan.
One netizen urged other netizens to save money — by shopping in Japan. She praised a shopping mall in Sapporo as “top standard” for shopping with a “beautiful” Gucci store.
Another post viewed by CNBC saw the creator say they “shopping until their legs go weak.”
Interest in visiting Japan among wealthy Chinese households rose 5 percent in May from a survey conducted in September last year, according to a study by consulting firm Oliver Wyman. The income segment includes mainland Chinese families earning at least 30,000 yuan ($4,140, or about $50,000 a year).
Research by Oliver Wyman found that prices of many luxury products in Japan are 10% to 30% cheaper than in mainland China.
This discount is much higher than when compared to Hong Kong. For example, a Louis Vuitton Speedy Bandouliere 20 sold for 16,700 yuan in mainland China at the time of Oliver Wyman’s research, with a 3% discount in Hong Kong — and a 19% discount in Japan.
The report said Malaysia reduced prices by 10% and France reduced prices by 27%.
The article quotes an unnamed luxury brand retail manager as saying: “In Asia, Japan has the most comprehensive product portfolio (e.g. styles, colors, etc.) next to Hong Kong, for most luxury brands.”
Growth slows in China
Chinese shoppers’ interest in Japan in general Chinese luxury spending has fallen amid uncertain future incomes. Local people are also increasingly prefer cheaper vacations in mainland China.
About half of Chinese luxury spending took place overseas before the pandemic, but that has now halved to around 20% to 25%, according to Oliver Wyman.
According to the report, as of May, Japan was the fourth most popular destination for overseas luxury shopping, although Hong Kong remained the most popular location, followed by Macau and Singapore.
“Globally, the Chinese customer base has also declined but is holding up better than mainland China as spending has been redirected overseas,” Burberry said in its earnings report earlier this month. “Japan continues to grow, benefiting from strong tourism spending primarily from Chinese customers and nearshore customers in Asia, while the local population remains weak.”
Burberry’s sales in mainland China fell 21% in the most recent quarter compared to the same period last year, while sales in Japan rose 6%. The overall decline in global sales has prompted the luxury brand to issue a profit warning and suspend its dividend, as well as replace its CEO.
In the three months ended March 30, Coach owner Tapestry saw sales in Greater China, which includes mainland China, Hong Kong, Macao and Taiwan, fall 2%. But sales in Japan rose 2% during that period. The company has not yet scheduled its next earnings release.
— CNBC’s Sonia Heng contributed reporting from Singapore.
