“Nouveau Riche” of Inland China Best Test for Brand Success

on April 13 2011 | in Lifestyle Retail Trends | by | with No Comments

Chanel, Hong Kong

Chinese tourists like to spend. In 2010, the 54 million Chinese who traveled abroad spent about $54 billion in purchases outside the mainland—$6 billion more than their domestic spending.

In 2011, that $54 billion is projected to increase by 12-14 percent. The number of Chinese tourists abroad is projected to increase by 3 million. Have luxury brands found a new cash cow?

Maybe. But the spending habits of these Chinese tourists may surprise Western predictors. Many tourists, particularly those traveling in tour groups, are from the inland, insulated from product marketing concentrated in coastal cities, and are China’s nouveau riche—less brand-savvy than their coastal compatriots, but just as willing to pay top dollar.

Most Chinese tourists focus their travels on destinations close to home: Singapore, Macau, Hong Kong, Taiwan, Japan, South Korea. For those who manage to get a visa to Europe or the United States, however, it’s time to spend.

A group of 140 newly-rich inland Chinese recently visited the States on a twelve-day tour. The group consisted of members of a Chinese CEO club started by construction tycoon Yan Jiehe, one of China’s wealthiest men. The whirlwind tour included New York, Boston, Los Angeles, Las Vegas, and a lot of shopping.

“To spend money,” said Rob Guo, an employee of the CEO club. “That is their number-one task.”

The group did so with panache—showing exactly what brands have made an impact inland.

Louis Vuitton bags, Patek Philippe watches, and Lancome beauty products topped the list of brands desired by travelers. Other branded products they sought (and bought) included suits by Armani and Zegna; products by Gucci and Prada; cosmetics by Chanel, Chloe, La Prairie, and La Mer; watches from Rolex and Tag Heuer.

Watches especially were popular; one in ten on the tour bought at least one, some purchased two or more– all with price tags between $40,000 and $50,000.

“The Chinese think watches are the mark of a successful person,” said Paul Xia, a guide from Beijing-based tour company Lukintl.

Their purchases were not confined to those more traditional ideas of luxury products, however. Men in the group bought up shelves of European-made Philips Norelco razors, and after an enthusiastic visit to the Apple Store, one member of the group purchased four computers.

A stop at a Las Vegas outlet mall showed that, while brand recognition is important to the nouveau riche, nonrecognition will not stop their spending. Tourists were at a loss among stores like Ferragamo, Polo Ralph Lauren, and other brands they did not recognize. But that didn’t keep them from making purchases.

“They don’t know where to buy, but they will buy whatever they find,” said Roger Wang, another Lukintl guide.

Regardless of what they bought, the Chinese all had one particular buying habit: paying in cash.

“The Chinese don’t trust each other, so they don’t trust credit cards,” said Xia.

While the Chinese don’t trust each other, they have plenty of faith in America.

“There are no fake products in America,” said one tourist, who spent about $100,000 during the trip. “That is why I prefer to buy these things there.”

 

 

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image credit: slices of light

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