Chapter 11 – Luxury goods, amenities and art

[Note: below is Chapter 11 from Great Wall of Numbers]

As I mentioned in Chapter 3, an estimated 82 million Chinese tourists traveled overseas in 2012.  At $69 billion in purchases in 2011 (and $98 billion in 2012), these same tourists collectively now spend the third largest amount while abroad (behind Germany and the US).1 Nine of the top 10 travel destinations for Chinese are in Asia (e.g., Hong Kong, South Korea), the exception: the US which was visited by 1.36 million Chinese tourists in 2011.23 And in the first half of 2012, “Chinese tourists visiting the US eclipsed that of travelers from other countries.”4 In fact, Chinese tourists spent an average of $7,107 in the US in 2011.5 According to Shao Qiwei, of the National Tourism Industry, “China and the US are each other’s fourth-largest tourism destinations.”678 A 2012 survey conducted by Global Blue, a tax refund tourism company, found that “82 percent of Chinese tourists see shopping as a vital part of their trips overseas.”9 For comparison, France in 2011 – with 900,000 visitors – was Europe’s top destination for Chinese tourists and the UK received about 150,000 tourists from the mainland (who collectively spent $390 million in the UK).101112

So what does this mean for your business?  How can you and your company capitalize on the popularity of Chinese traveling to the US and other western countries?  And what are they buying?

In a phrase: foreign luxury goods.13 Domestic luxury brands purportedly sold well in the 1980s and 1990s but with the entrance of foreign labels they have faced stiff competition.  According to the Shanghai Academy of Social Science, “just 10 percent of Shanghai’s traditional brands are making a healthy profit. Roughly 70 percent are struggling, with the rest on the verge of bankruptcy.”14 In contrast, according to recent reports from McKinsey and from Bain (two of the largest management consulting firms) Chinese consumers are now the biggest luxury buyers globally, consuming primarily foreign brands.1516 This is not to say that Chinese designers are not creating their own fashion trends worldwide.  Last year Haizhen Wang, from Dalian, won the Fashion Fringe Award for young designers and was mentored by Christopher Bailey, creative officer at Burberry.17 Similarly Huishan Zhang is another young mainlander who spent a year at Dior and whose first collection sold out within its first month in London.  For now however, luxury brands consumed by Chinese consumers are decidedly Western.

Overall McKinsey & Company estimates that “purchases by Chinese both at home and abroad account for over one-quarter of the global total” and that by 2015 will account for one third of the luxury market globally.18 And who are buying these goods?  According to research from CLSA, an equity broker based in Hong Kong, men account for 55% of China’s luxury goods market (compared with the global average of 40%) because as Bain noted in another recent report, businessmen gift the items to significant others and to build guanxi with officials, associates and partners.19

On that note, not all is smooth sailing for luxury goods.  For example, according to Ren Guoqiang, a partner at Roland Berger Strategy Consultants, “more than 25 percent of the luxury items sold on the Chinese mainland were used as gifts.”20 Thus during the recent crackdown on government corruption currently being carried out nationwide, gift-giving has dropped markedly.21 As a consequence, according to a report from the Federation of the Swiss Watch Industry “show[s] that Swiss watch exports to the Chinese mainland dropped 27.5 percent year-on-year in September [2012].”22 This is on the back of 40% growth from 2011 noted below.  Furthermore, in February 2013, three of the largest global luxury houses including the parent companies of Gucci, Louis Vuitton and Burberry announced that they would be slowing down their expansion in China this year due to softer sales last year.23

Yet this may be a temporary bump domestically and a substantial amount of this luxury shopping activity is actually done overseas.  Bain estimates “that 60 percent of Chinese purchases are made outside China.”24 And according to a recent KPMG study, “71% of China’s middle class made a trip outside of the country” last year of whom 61% of the study respondents purchased cosmetics overseas and 51% had bought luxury watches.25 Altogether Chinese tourists on average spend $14,686 overseas during these shopping trips, according to Global Blue a shopping tourism service company.26

Why?  One reason has to do with import taxes and duties mentioned in Chapter 1; up to a 60% luxury tax on high-end imported goods.  For example, according to the Ministry of Commerce, a Chanel bag in Shanghai costs 72% more than in Paris and the same Tiffany & Co necklace costs 6,900 RMB in the US but 11,000 RMB on the mainland.27 In addition, even when a 25% customs duty and 15% VAT are accounted for, luxury goods makers such as Burberry also mark-up their mainland products as part of an ‘elite’ perception pricing strategy (e.g., towards the nouveau rich, 暴发户). 28

As a consequence, large amounts of luxury goods are substantially less expensive when purchased abroad relative to the prices on mainland China.  And because many consumers travel abroad to purchase these products to circumvent the importation costs, according to Nick Debnam of KPMG, “One brand told us that for every dollar they sell in China, they’ll sell more than $2 outside of [the country] to Chinese consumers.  Brands are realizing it’s a global market. You can’t get fixated on just within the China market.”2930 Furthermore, KPMG estimates that luxury purchases account for 71% of all spending done by Chinese tourists overseas.31 Thus if you own or operate a luxury goods store in the US or Europe, you may be able to cater to new potential customers.

In 2011, prior to overtaking the US, the luxury consumer goods market in China was an estimated $51.7 billion (€40 billion), slightly less than the size as the luxury consumer goods market in the US ($62.4 billion).32 To get this number, overseas sales are included.  For example, according to the Financial Times, on the mainland the market for these goods in 2011 itself was actually only $16.77 billion.33 This domestic number itself will grow to $27.39 billion by 2015 (up from $9.9 billion in 2009).34 Yet if you include the shopping done by Chinese consumers in Hong Kong, Macau and Taiwan this rises to $30.5 billion.35 And then add in an estimated $15.5 to $19.5 billion spent in 2011 by tourists outside of Asia, this number rises to the $51.7 billion.  So no matter how you shake it, there is a huge demand for foreign luxury products by Chinese consumers.  Or as P.T. Barnum might say, at least in the short-run no one ever went broke underestimating public taste and in this case, Chinese tastes.3637

In fact, Harrods department store in London, to better cater to mainland customers that frequently travel to the UK and shop during the past Christmas holiday brought on board “70 Mandarin-speaking shop assistants” and “has more than 100 UnionPay terminals directly connected to Chinese bank accounts.”3839 Selfridges, another department store in London, employs “dozens of Mandarin-speaking staff.”40 Likewise, the Hippodrome Casino on the West End “has an entire floor dedicated to Chinese gamblers” and the staff speaks Chinese.41  Burberry has taken it a step further and doubled the amount of Putonghua (Mandarin) speaking staff in Europe this past year.42 Why?  Because according to Patricia Yates, director at VisitBritain noted, “the average Chinese visitors spends about three times as much – 1,600 pound ($2,600) – as the average visitor to the United Kingdom.”43 Or more to the point above, Chinese tourists spend five times as much at Herrods than Americans do.44

Similarly in New York City, to prepare for the tourist rush during the 2013 Spring Festival celebration (春节), Bergdorf Goodman (an upscale woman’s department store) added Mandarin speaking staff and Saks Fifth Avenue installed UnionPay terminals for Chinese nationals.  On the other coast, Haiyi Hotels in San Francisco launched a special discount for Chinese groups traveling in large part because Chinese visitors to California (who collectively spent $1.5 billion in 2011), “is expected to increase 57 percent between 2011 and 2015.”45 And not to be left out, luxury makers such as Gucci promoted Spring Festival with red accessories personalized with Chinese zodiac symbols and Burberry sold bags with snake-skin prints to kick off the “year of the snake” (each year is represented by a different animal, 2013 is the snake).46

Are there any other niches that SMEs can find success catering to?  In December 2012 I spoke with Adam Remington, founder of Remington Pipes, a Tennessee-based pipemaking company.47 Over the past several years his business has grown to include a customer-base in China which is interested as collectors and consumers of his hand-made tobacco pipes.  According to him, “one of our strengths is that we customize each pipe to an individual client.  The value-added is that we provide a rare commodity as specialists, as artisans, to a consumer that has an appreciation for our craft.  For example, the wood we use for the pipe is briarwood that is imported from Italy because it only grows in the Mediterranean climate.  And we use ebonite, a vulcanized type of rubber that is imported from Germany.  Then over the course of several days we hand-cut, shape, stain and paint a unique pipe produced to the customer’s specifications.”  Finished products start at $600 and can reach several thousand with a comfortable profit margin.

Remington’s firm is an example of a successful American craft business that can generate revenue from China without a physical presence on the mainland.  While they have an expansion plan to open a workshop within the next year in the Yangtze Delta Region, perhaps your craft and specialized trade company (e.g., hatter, haberdasher, cobbler) can find a niche customer base as well; maybe even by producing a product in a 3D printer as described in Chapter 7.

Luxurious conundrums and opportunities

Why are they buying these goods while traveling?  As I briefly mentioned in Chapter 8, several of my students wanted to purchase Nike shoes primarily because of the perceived authentic, “higher” quality of the imported shoes.  However, unbeknownst to many consumers around the world, numerous “high quality” goods are actually manufactured in China and then exported to other countries, including Nike shoes.48 These other countries typically levy import taxes and duties on the manufactured goods.  One challenge for foreigners who want to sell sport apparel and luxury goods into markets in China – after receiving the necessary licenses and permits – is how to bring the goods into China (see ExportNow in Chapter 7)?

If a retailer on the mainland stocks goods from Chinese manufactures – despite the actual quality – mainland consumers may think that the goods are less authentic and of lower quality.  For example, in 2011 a Shanghai-based retailer called Da Vinci furniture was accused and found guilty of lying to customers about importing its products from Italy.  Upon investigation it was discovered that the furniture was manufactured in Chinese factories, sent (“exported”) to Shanghai’s Waigaoqiao trade zone and then sent (“imported”) to Da Vinci retail outlets.49 Thus the dilemma: if foreign traders import goods from the US and other countries they will face both import and export taxes.50

What kind of goods are Chinese consumers now buying?  Watches from Citizen and Rolex, bags from Burberry and Coach, wines from Bordeaux and the Napa Valley, art from Christie’s and automobiles from Mercedes Benz and Ferrari.  In fact, China is the largest importer of Swiss watches, “accounting for 30 percent of exports of the country’s [Switzerland’s] roughly 200 brands in 2011.”5152  Another example is wine.  While France still dominates as the largest wine exporter to Mainland China, the Chinese market is now the 5th largest export market for US wineries (Hong Kong is 3rd).535455 China is also the largest importer of cognac (by value) and is expected to surpass the US as the largest consumer of the brandy by 2020.56 In fact, Camus, a French cognac producer, sees Chinese consumption as a percentage of global consumption to increase from 35% today to over 50% in the future.57

Hand bags are also very popular.  In Q1 2012, Coach, the US bag maker, had mainland sales rise nearly 40%; and by Q2 its profits rose 24% “driven in large measure by a 60% sales gain in China.”58 Stimulated by that, Coach is now “pushing for China to become its No. 1 market in the next three years.”59 There are several reasons behind this.  And this is where your company can distinguish itself from the competition.  What exactly is a luxury good?  In addition to institutionalized qualitative management techniques like Six Sigma (which are still not prevalent on the mainland) and because of the food safety issues I mentioned in Chapter 3, more than 60% of Chinese consumers wanted to purchase and import products from foreign countries because they are deemed safer and simply better.60 A recent survey from Boston Consulting Group also found that 61% of Chinese consumers were “willing to pay more for the U.S. made goods — in some cases quite a bit more.”61

Thus while the goods your company manufactures may not necessarily be typically classified as a “luxury” product, with a little rebranding and market positioning, you can turn your well-made widget into a must-have product.  Take a page from perception marketing like Coach handbags did above.  In the US, Coach bags are considered mid-level products, yet their management team has tweaked the marketing in China and elevated them to high-end luxury products.  And because Chinese consumers already consider and perceive foreign products to usually be of higher quality, why not use this advantage to satiate demand?  It can even be as simple as using the 3D printing opportunities in Chapter 7.  Perhaps by partnering with a boutique fashion designer in your hometown and some tweaking of CAD files you can be the first to market a widget that is easy enough to replicate in a MakerBot yet novel enough that it has not been produced by others (e.g., the first mover of a trendy purse).62

An American source at the company explained to me that one of the reasons Coach has succeeded despite domestic copycats and knock offs is that it continuously changes its product line, updating it throughout the year (e.g., spring, summer and fall lineups).  Because it changes so often, it is hard for copycats to catch-up.  In contrast, many of Louis Vuitton’s most popular merchandise items are classical designs that do not change as much and are frequently uniform (e.g., same iconic colors).  As a consequence, local copycats have relatively more time to clone the fashion house.  This is not to say that Coach is immune to counterfeiting as a recent investigation in China during November 2012 found thousands of counterfeit handbags including Louis Vuitton, Hermès and even Coach.63 Yet another difference is that because Coach’s price points are targeted as “affordable luxury,” it can reach a broader range of demographics.  Thus, while their handbags are still relatively expensive (e.g. $600) they are substantially less compared to a Louis Vuitton equivalent which starts at $3,000 and increases markedly.

Another challenge for luxury brands is that in the event of a downturn, which can take place even in China, sales can inevitably also take a hit.  For example, several European luxury makers including Mulberry issued a profit warning in mid-October 2012.  Mulberry noted that its “overseas shipments slumped 4 percent” in the second and third quarter.6465 Another competitor, Burberry, which operates more than 60 stores on the mainland with plans to open 100, issued a profit warning in 2nd half of 2012 due to a macro economic slowdown on the mainland and Europe.66 Another issue that is hard to quantify is gift-giving for guanxi as noted above.  According to one 2009 estimate, gifts to government officials comprised nearly 50% of all China’s luxury sales.67 During recent public appearances, a number of political policy makers have come under fire for wearing expensive belts, watches and handbags that their official salaries could not cover.68 As a consequence there has been some public backlash on social media (like Weibo discussed later in Chapter 13) that has led to investigations and crack-downs on traditional gift-giving.  Luxury consumer goods makers and other high-end goods like Moutai’s baijiu (strong domestic liquor) are purportedly vulnerable to this negative public sentiment.6970 In fact, on March 18th 2013, the Shanghai stock index dropped 1.7% to its lowest point in three months.  Leading the downturn were baijiu firms because Li Kaqiang, the new Chinese premier, announced that government spending on receptions, hospitality and banquets would be significantly reduced this year.71

Another area that US companies can provide services for is summer and winter camps like authentic dude ranch experiences.  A number of students I have had over the years have visited camps in the US and come back ecstatic.  In fact, each semester at least one student and their family have visited places like Yellowstone Park, the Grand Canyon or the Grand Tetons.72 According to the China Daily, in 2011 more than 60,000 Chinese children traveled to the US and participated in various summer programs.73 These participation rates, like tourism rates in general, are expected to increase substantially this year (one estimate is 40-50%) due in part to looser visa restrictions placed on Chinese tourists to the US.74 What services can you or your company provide to these ‘genre’ tourists?75

Amenities and services

In Chapter 3 I mention an interview with Glenn Wilkinson, a consultant with 25 years of experience in China.  In addition to opportunities in the restaurant industry another area that Wilkinson as well as Wendy Bao mentioned is that China’s growing middle class is turning to amenities.  This includes services like high-quality sports massages, spas and even quality-controlled leisure activities.  For example, there is now a large massage chain called Dragonfly Retreat (悠庭), which has grown tremendously over the past decade in large part because its entrepreneurs saw an unmet need: a professional, non-compromising service that was sanitary, reliable and with a consistent quality.  As a result, even with its sometimes long wait times, it has received high praise by CNN and and now operates 17 locations (and counting) on the mainland.76

While relatively unpopular in the West, karaoke or KTV is also a multibillion dollar business.  For example, Wanda Group is the 5th largest private company in China and operates one of the largest KTV chains (with 30 KTV boxes or “bars”) on the mainland.77 Wanda is expanding overseas and bought AMC Entertainment (a large US theater chain) for $2.6 billion in 2012 and plans to invest another $10 billion in the US theater chain and $30 billion globally over the next decade.78 KTV venues operated by Muse, Cashbox and Haoledi chains are also popular in part because they gives their customers a sense of privacy in an otherwise physically crowded environment.

In fact, each weekend millions of consumers including many of my students, colleagues and friends visit and patronize KTV venues.  KTV is popular with all demographics and strata within China, from teenagers to the elderly and from couples to business associates.  How popular?  During August 2012 the most popular app on iOS and Android in China was Changba, a portable KTV booth.79 In my own anecdotal experience in both KTV and Noraebang’s (the Korean equivalent), local customers enjoy it because they have a private outlet to share their emotions and feelings with their friends – something that sometimes is difficult in relatively dense metros.  Just like happy hour in Western countries provides rest and relaxation to bar patrons, so to do KTV establishments.

What does this mean for you and your company?  What amenities can you provide that may satiate an unmet demand?

Main Event and Dave & Buster’s (D&B) are two entertainment and restaurant operators in the US that cater to families and adults.  For example, the ten Main Event locations in Texas offer food, bowling, billiards, video arcade, laser tag, miniature golf and rock climbing under one managed roof.  Similarly, D&B manages 60 locations in North America each of which combines a restaurant, video games, shuffle board plus a sports bar.  While there are a number of independent sports bars and numerous video game arcades throughout cities in China, there is no managed chain similar to Main Event or D&B.  One reason this might be the case is that in China, students in high school and college are expected to focus on studies and scholastic-based extracurricular activities – hanging out with your friends after school – especially in smaller provincial cities is not as prevalent as it is in the West.

In Chapter 6 I mentioned that internet bars or net cafes (wangba) are substantially much more popular than their Western equivalents.  Xinhua estimates that as of 2009 there are more than 138,000 “cybercafés” in China.80 And 70% of the customers are between the ages of 18 and 30.  While these demographics might suggest that rest and relaxation at establishments like Main Event may be profitable enterprises, based on my own anecdotal observations and knowledge of cultural norms, Main Event-like proprietors may face consumption behavior that is unlike that of Western teenagers and young adults.  Thus like any other investment, potential investors should do their due diligence before cutting the ribbon and breaking ground.  And trying to compete for the same demographic group that Wanda, Haoledi, Cashbox, Muse and others currently attract is yet another hurdle that must be confronted.

Art is in the eye of the beholder

While both Sotheby’s and Christie’s have been continuously denied licenses to operate on the mainland, their art house auctions in Hong Kong each generated nearly $1 billion a year in sales in 2011.  According to The Wall Street Journal, in 2011, Sotheby’s sold $960 million of collectibles in Hong Kong and Christie’s sold $855 million in collectibles also in Hong Kong.81 All told, the 2011 art season from the Big Four auction houses in Asia (Sotheby’s Hong Kong, Christie’s Hong Kong, China Guardian and Beijing Poly) pushed the Chinese auction market from the 2nd highest at $8.2 billion in 2010 to the worlds largest.  In fact, with $4.8 billion in total sales, the Chinese art market “made up 41% of the global total turnover” in 2011.82 Yet this is not necessarily an area for get-rich-quick schemes either.  To be even handed, the overall art market slumped on the mainland in 2012 (due to a sluggish macro economy).  For example, Sotheby’s noted a marked decrease in sales, generating $258 million in autumn sales (a 37% decline from the previous year).83 Overall sales at Sotheby’s dropped from nearly $1 billion in 2011 to $592.9 million in 2012.84 Likewise, Christie’s reported a 15% drop year-on-year.  And both China Guardian and Beijing Poly faced significantly larger drops as well.  Altogether auction sales in China dropped 30% in 2012, allowing the US to regain the top position as market leader.85

However there are several reasons why the art market in China has grown over the past decade.  The first is that China, despite the internal and external conflicts that have resulted in the destruction of its cultural heritage (e.g., Old Summer Palace, 圓明園) still has one of the largest indigenously produced collections of art and calligraphy, a cultural endowment in which collectors around the world are increasingly interested.  Another reason is, as I briefly discussed in the previous chapter, art sales are one way to move capital out of China, bypassing the strict capital controls on the mainland.  And one creative corollary to this legal loophole is “elegant bribery,” a phenomenon that Jia Guo of Columbia University methodically detailed last year.86

While I certainly would not encourage the risky cat-and-mouse business of bypassing capital controls, Western artists and collectors may find new consumers and clients to whom to sell their paintings, statues and art wares.  In fact, skilled artisans in classical realism, impressionism and academic painting may be able to set up art schools and salons on the mainland.  This is a region, which despite a cultural appreciation for art and institutionalized support, currently has room for foreign skilled experts.  As I noted in Chapter 9, there are a growing number of public and private education venues and projects to satiate consumer demand in scholastic activities, this includes art and sculpting.  According to Nigel Carrington, rector for the University of the Arts London, UAL is looking to set up art foundation courses in part because “the Chinese are “furiously building” art and design schools in a bid to stem the flow of young talent to the west.”87

Do you have to move to China to sell art or services?

Not always.  Ken Yeh, chairman of Christie’s in Hong Kong, after observing a surge in impressionistic buying thinks that “the potential for Western art in China is huge, just massive.”88 Last year the New York Times noted that this renewed interest in Western art appeals to the affluent, like hedge fund manager Lawrence Chu, as well as new Chinese buyers who were raised during the Cultural Revolution and are now “successful business people with huge amounts of money at their disposal.”89 Perhaps you and your company can sell paintings and statues on Taobao through ExportNow (discussed in Chapter 7).  Perhaps you can use Wildfire or Mila (discussed next in Chapter 12) to locate patrons and clients.  Either way, your company can capitalize off the consumer demand for Western art in China without needing to open a physical shop on the mainland.

Another opportunity for independent artists and hobbyists is to sell art through a Beijing start-up called Yizzu.  For several hundred RMB, consumers can purchase reprints instead of paying thousands for an original.90 Community sites like this will enable a new segment of clientele to decorate their homes and offices.  And for perspective, at the other end, in 2011 more than 700 paintings sold for $1 million in China, compared with 426 in the US and 377 in the UK.91 Thus there are now opportunities at all price points.

Takeaway: Chinese tourists now comprise one of the largest tour blocks in the world, at 82 million overseas tourists in 2012.  China is also home to one of the largest markets for luxury consumer goods and its middle class places high value on foreign-made products.  In addition, Hong Kong – and by proxy, China – is now the world’s the largest art market.  How can you and your company capitalize off of these changes?  Can you reposition your brand and product like Coach handbags has?  Do you currently provide artisan services such as training and tutelage?  Perhaps you can begin to market your brand overseas using social media (discussed in Chapter 12) to promote your company to a new customer base that automatically considers and perceives foreign products and services as high quality.  And remember, if you do not take this opportunity, your competitor’s likely will.


  1. See China Tourism Academy showed 70 million Chinese tourists outbound in 2011 from China Business Network, Chinese rush overseas for holiday from China Daily and China Voice: Keep China’s big spenders at home from Xinhua []
  2. Bless the Crass Chinese Tourist from The New York Times []
  3. Thailand now receives more tourists from China than anywhere else.  In fact, tourists from the mainland “accounted for 13 percent of the 19.8 million visitors to Thailand in the first 11 months of last year.”  For example during the 2013 Spring Festival, an estimated 270,000 Chinese tourists visited Thailand.  See Chinese Tourists Lost in Thailand Boosts Hotels: Southeast Asia from Bloomberg and 270,000 Chinese in Thailand during festival from China Daily []
  4. China now top source of leisure travelers to US from Want China Times []
  5. Chinese tourists spend more in US in 2011 from China Daily []
  6. Ibid []
  7. Some of these mainland tourists are now traveling abroad during Chinese holidays.  In fact there are numerous travel groups that are targeting the US during the winter due to its relatively slower season (compared with the intensely busy travel season on the mainland).  According to one report “four Chinese tourism companies have launched a project to attract Spring Festival vacationers from China” to the US.  See Start the new year with a trip to the US from China Daily []
  8. Hainan Airlines recently set up a non-stop direct route between Beijing and Chicago.  See Hainan Airlines to begin direct Chicago flights from China Daily []
  9. Global Blue also found that the top three favorite destinations for Chinese tourists are France, Germany and Singapore.  See Chinese overseas shopping hits record high from Xinhua []
  10. One of the reasons why there is such a large disparity between tourists to France versus the UK has to do with the Schengen Area harmonized visas (e.g., if you get an tourist visa to one member of the EU you can visit any of the other members).  The UK is implementing a new visa policy to streamline and make it easier for mainland tourists to visit; ; in 2012 the UK Border Agency issued 286,000 visas to people in China.  And according to Patricia Yates of VisitBritain, “[t]he average Chinese visitor spends about three times as much — £1,600 ($2,600, 2,000 euros) — as the average visitor to Britain.”  Collectively their spending amounted to £240 million ($390 million) last year.  See Britain looks to Chinese tourists for Christmas cheer from Agence France-Presse and UK aims to streamline visa application process from Global Times []
  11. France tops European table for Chinese tourists from The Guardian []
  12. See Chinese check-ins from The Economist and Chinese flock to Europe, US for holiday from China Daily []
  13. Another possibility that I did not mention is that you could cater to Chinese tourists coming to your hometown.  For example in 2011, “Starwood Hotels & Resorts Worldwide and Hilton Worldwide rolled out global hospitality standards such as in-room tea kettles, slippers and translation services, centered on wooing Chinese guests.”  See Meet Hualuxe, China’s Newest Upscale Hotel Brand from The Wall Street Journal []
  14. Chinese brands struggle in luxury market from People’s Daily []
  15. Chinese luxury: top of the shoppers from Financial Times []
  16. For an illustration of why and which foreign items are purchased in China see this excellent infographic: Why Do Chinese Consumers Pay So Much for Foreign Brands? from East-West Connect []
  17. Why China is sitting on fashion’s front row from CNN []
  18. Luxury Without Borders: China’s New Class of Shoppers Take on the World from McKinsey & Co. []
  19. See China’s metrosexual men revive luxury shopping from Reuters, Let’s hear it for the boys: China’s men lift luxury market from Reuters and Gucci owner targets luxury brands to cash in on Chinese consumers from South China Morning Post []
  20. Corruption curbs crimp luxury market from China Daily []
  21. According to one 2009 estimate, gifts to government officials comprised nearly 50% of all China’s luxury sales.  See China Targets Corruption, Luxury Brands Mourn by Evan Osnos, For Bribing Officials, Chinese Give the Best from The New York Times and SARFT orders ‘gifting’ ads off the air from Global Times []
  22. Corruption curbs crimp luxury market from China Daily []
  23. 奢侈品告别“中国盛宴” Gucci今年在华暂停开店from Yicai []
  24. Chinese Shoppers Overtake U.S. as Top Luxury Buyers from Bloomberg []
  25. The actual study period was from August 2011 to August 2012.  See Coming to a City Near You: More Chinese Shoppers from The Wall Street Journal []
  26. China Gets Angry at Overseas Luxury Shopping Trips from The Wall Street Journal []
  27. See Le Chinese tour de luxe from South China Morning Post, Luxury brands still reaping big rewards in China from South China Morning Post and视频:业内人士曝洋奢侈品在中国利润吓死人 from CCTV []
  28. In economics parlance this is called “conspicuous consumption” []
  29. Coming to a City Near You: More Chinese Shoppers from The Wall Street Journal []
  30. Chinese consumer spending overseas increased 31% between 2011 and 2012 yet sales growth on the mainland for luxury goods fell from 30% to 7% during the same time.  See China Voice: Keep China’s big spenders at home from Xinhua []
  31. China’s Frills and Posh Market Springs a Leak from Caixin []
  32. Another estimate cited by Colin Speakman is that in 2012 Chinese consumption of luxury goods amounted to $46 billion in total of which $27.1 billion was spent overseas.  See The bane of domestic consumption from China Daily []
  33. Luxury goods: style rises in the east from Financial Times []
  34. Burberry lays on ‘mother of all parties’ to launch flagship Beijing store from The Telegraph []
  35. To give you an idea of how many people visit Hong Kong, in November 2012 more than 3 million mainlanders visited the SAR; this resulted in a 13.7% increase in sales of jewelry and watches.  See Hong Kong Luxury Sales Rebound on Confidence in Mainland from Bloomberg []
  36. Why China’s 1% Is Now Discreetly Hiding Its Wealth from The Atlantic []
  37. One challenge for foreign retailers that receive tourists from the mainland is dealing with the “kickback” bonus (5-10% of sales) to tour operators who bring the Chinese tourists to the actual stores.  See Copenhagen Luxury Retailers Face Chinese Tour Guide “Kickback Culture” from Jing Daily []
  38. Santa is coming and China takes a lot more notice from China Daily []
  39. UnionPay is the largest credit card company on the mainland (equivalent to MasterCard and Visa).  Despite the assumption that few people or families have credit cards in China, the reality is that by the end of 2013 there will be an estimated 360 million credit cards on the mainland.  This is up from a mere 3 million in 2003.  See More Chinese to swipe credit cards in 2013 from CCTV News, Spring Festival holiday fuels bank card transactions from Xinhua, China Credit Card Market Forecast to 2015 from RNCOS and Competing for China’s credit card market from McKinsey Quarterly []
  40. Chinese tourists snub ‘Big Stupid Clock’ from BBC []
  41. Ibid []
  42. Le Chinese tour de luxe from South China Morning Post []
  43. Santa is coming and China takes a lot more notice from China Daily []
  44. Chinese tourists snub ‘Big Stupid Clock’ from BBC []
  45. Retailers prepare for holiday shoppers from China from China Daily []
  46. There are 12 animals altogether in the Chinese astrological zodiac.  See What Do People Want Most for Chinese New Year? Cash Money from The Wall Street Journal []
  47. Remington Pipes []
  48. Approximately one in three pairs of Nike shoes are made in China.  Nike contracts out to 180 manufacturers, employing 210,000 workers on the mainland.  See Nike still sees China labor challenges from USA Today and Rising Chinese salaries pushes Adidas to look elsewhere: report from Agence France-Presse []
  49. See Imported’ furniture never left country, say officials from Shanghai Daily, What did DaVinci furniture scandal expose? from People’s Daily and Furniture retailer fined after ‘fake imports’ scandal from China Daily []
  50. While many other countries have similar policies, dozens of Chinese industries and product-lines receive VAT export rebates and subsidies which incentivize production irrespective of their profitability.  See Nation ‘unlikely’ to reduce export rebates from China Daily and Vuvuzela sounds clarion call for China’s manufacturers from Xinhua, Glut of Solar Panels Poses a New Threat to China from The New York Times and China adjusted VAT & consumption tax policies for exported goods and services from KPMG []
  51. Swiss Watch Boutiques Swap Christmas Trees for Hongbao from Bloomberg []
  52. Not all is smooth sailing for luxury goods.  For example, during the recent crackdown on government corruption, gift giving has dropped markedly.  And since luxury watches were one of the popular gifts provided to businessmen and officials, there has been a measurable decline.  According to the Federation of the Swiss Watch Industry “show that Swiss watch exports to the Chinese mainland dropped 27.5 percent year-on-year in September.”  This is on the back of 40% growth from the previous year.  See Corruption curbs crimp luxury market from China Daily []
  53. One of the reasons why Hong Kong has become a large importer of wines is that duties were removed on wine imports in 2008.  See Mainland China Now #5 Export Market For US Wines, HK #3 from Jing Daily []
  54. Yacht designers – both foreign and domestic – have also begun finding new opportunities with wealthier Chinese clients.  Two other areas are hand-made tobacco pipes and hand-made bicycles which are both seen as unique, luxurious items by high-net worth individuals.  See Made-in-China superyachts reflect changing tide of economy from CNN, Bikes for bonuses as China’s wealthy reminisce from Reuters and The new face of bling in China – bikes from Reuters []
  55. There may have been another bubble in the wine industry as wine sales dropped from $397 million in 2011 to $322 million in 2012 at the biggest auction houses.  See Wine Auctions Drop 19%, Chinese Demand Cools for Bordeaux from Bloomberg []
  56. China On Track To Be World’s Biggest Cognac Consumer from Jing Daily []
  57. China Has Become A Very Important, Huge Market For Every Cognac Company from Jing Daily []
  58. See J.Crew Brings Its Brand to China from The Wall Street Journal and Strong overseas, US sales lift Coach 1Q profit from BusinessWeek []
  59. Coach Looks to Bag Chinese Market from The Wall Street Journal []
  60. The consuming challenge of food safety from China Daily []
  61. See U.S. and Chinese Consumers Willing to Pay More for Made in USA Products from Boston Consulting Group and Chinese Willing to Pay More for Made-in-USA Goods from The Wall Street Journal []
  62. Chinese consumers are becoming increasingly savvy and in-tune with fashionable trends from elsewhere as magazines such as Elle, Vogue and Cosmopolitan publish large monthly issues customized for their Chinese audience.  See The Stylish Side of China from The New York Times []
  63. China uncovers luxury bag fakery, arrests 73 from Xinhua []
  64. Fashion industry struck by China lowdown from The Independent []
  65. It’s Up, It’s Down: Reading the Tea Leaves on China’s Luxury Market from brandchannel []
  66. See Burberry profit warning chills luxury rivals from Reuters and Burberry lays on ‘mother of all parties’ to launch flagship Beijing store from The Telegraph []
  67. See China Targets Corruption, Luxury Brands Mourn by Evan Osnos, For Bribing Officials, Chinese Give the Best from The New York Times []
  68. China bloggers expose more corruption: reports from Agence France-Presse []
  69. See China’s downturn-proof booze makers hit government wall from Reuters and SARFT orders ‘gifting’ ads off the air from Global Times []
  70. After six months since the “clamp down” on “pricey booze” began, domestic liquor makers have reported that business was not initially been hampered and in fact they have posted strong profits in Q3 2012.  Yet at the turn of the New Year, baijiu manufacturers were especially hit relatively hard due to a new national government crackdown on extravagant spending at banquets and parties funded by local governments.  And according to a recent survey of high-network individuals in China, most affluent residents prefer to receive foreign luxury items as opposed to domestically made brands.  Subsequently Moutai itself has had a number of administrative problems that have only added to the issues of crackdowns on banquet and gift-giving.  Conversely imported liquor is reportedly seeing robust growth, with UK-based Diageo seeing a 50% increase in sales of its luxury Scotch.  See Mao’s $300 Red Army Liquor Suffers Before China Congress from Bloomberg, Withdrawal symptoms: China’s rice wine market from Buy Buy China, Glass half full for imported liquor from China Daily, Premium liquor shares iffy amid frugality campaign from Xinhua, Bottoms up: China booze makers defy economic gloom from Reuters and China gift crackdown hits watches, booze but foreign brands hold on from Reuters, 茅台整改:反腐潮加快白酒业全面市场化 from NBD, 媒体称多地严查公款吃喝后部分名酒价格暴跌from 163 and白酒年关难过from Caixin []
  71. Baijiu Stocks Sink After Premier Vows to Curb Spending on Banquets from The Economic Observer []
  72. On October 22, 2012 Bill Bishop highlighted a Chinese photographer’s tour of the American West during Chinese National Day (October 1-7).   Bishop predicts that there “will be lots more travelers like this as US visas get easier for Chinese tourists.”  See美国西部特写–大提顿国家公园_梁芳洁的芳草地_梁芳洁_博联社 from 梁芳洁. []
  73. Chinese parents turn to US summer camps from China Daily []
  74. Number of Chinese tourists to USA doubles after loosen visa policy from South China Morning Post []
  75. Glenn Wilkinson, the Australian consultant that I mentioned a couple of times, told me he knows of numerous Chinese who have gone and who are currently interested in going to the Australian Outback or even Africa.  This kind of “genre tourism” caters to those wanting to experience the authentic conditions (e.g., ruggedness, safari).  See For Affluent Asians, Africa’s Appeal from The Wall Street Journal []
  76. See Best massages in Shanghai from CNN and Dragonfly Spa Review from []
  77. Top 10 private companies in China 2011 from []
  78. Wanda of China set to buy more U.S. entertainment assets from Los Angeles Times []
  79. Changba: The Viral KTV App from The World of Chinese []
  80. China saw 138,000 Internet cafes as of 2009 from Xinhua []
  81. Art Sales’ Old Guard Gets Rival From Asia from The Wall Street Journal []
  82. Four Tips On How To Approach China’s Art Boom from Forbes []
  83. See Sotheby’s autumn HK sales drop as China economy slows from Reuters and Auction Houses Go Head-to-Head in Hong Kong from The Wall Street Journal []
  84. China art market: auction houses see slump in 2012 sales from Financial Times []
  85. Chinese slump dents global art market in 2012 from China Daily []
  86. In Guo’s words, “The briber first presents a forged artwork as a gift to the official being bribed, which does not violate the Chinese anti-corruption laws since such artworks have very low monetary value. Then, the official auctions the painting via an auction house. Finally, the briber attends the auction and purchases the artwork back for a very high price, as if he mistook the work for an original. Since bribery, rather than investment or personal appreciation, is the purpose of such purchases, “elegant bribery” is a significant source of inelastic demand for works of art in the Chinese auction market, driving prices beyond what can be explained by observable characteristics.”  See What Drives the Chinese Art Market? The Case of Elegant Bribery by Jia Guo []
  87. Art schools face uncertain financial future from The Guardian []
  88. Chinese take the art market by storm from China Daily []
  89. China’s New Cultural Revolution: A Surge in Art Collecting from The New York Times []
  90. Brings Chinese Art to the Masses and Builds a Community from TechNode []
  91. Four Tips On How To Approach China’s Art Boom from Forbes []