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Source: Global Times Global Times

Clicking for posh purchases

Published: 04 Nov 2009 06:02:01 PST

A shop assistant is arranging display at a designer handbag store in Shanghai Photo: CFP

By Sun Zhe

A popular joke about Chinese traveling in Europe tells of a wealthy Shanghai or Beijing woman who enters a Louis Vuitton store in Paris, scans the merchandise and points at two handbags.

"I'll take every bag in the store, except those," she tells the shop assistant.

A luxury buying spree is typically an important part of any Chinese package tour to Europe or the US because luxury goods sold in Western countries are usually 25 to 35 percent cheaper than those sold in China where luxury tariffs and other taxes and fees hike the price, Zhu Bo, an employee with a Beijing-based international exhibition company who usually goes to Europe on business travel and buys luxury goods for her friends, told the Global Times.

So it's no wonder that when mainlanders travel to the US, Europe or even tariff-free Hong Kong, few fail to replenish their luxury stock. But increasingly more Chinese high-end shoppers are finding they don't need a passport or Hong Kong entry card to fulfill their more material cravings.

They can sit at home and order their designer goods from websites, which purchase the items for them from the Western markets. Though the sties charge commissions, they are still much cheaper than luxury shopping in China itself.

The websites benefit from the price gap between luxury items sold in Western markets and the domestic market, said Zhang Yanping, an e-commerce analyst with Beijing-based iResearch.

 

Thriving luxury consumer market

According to Reuters, the global economic downturn has not dented the demand for pricey designer goods in China, where a study shows the affluent are buying handbags, watches and jewelry in force.

The study, by New York-based market research firm Pao Principle, found that almost 90 percent of the well-heeled Chinese surveyed had purchased a designer handbag over the past year.

For its study, the Pao Principle recruited and tracked the buying habits of 448 affluent individuals from the Chinese mainland.

Panelists are predominantly highly educated females, aged between 20 and 40. Most of them also own a home, Reuters reported.

Nearly two-thirds of men, and a third of women, also bought a luxury watch over the same period, while another 30 percent said they had gone home with one of the signature blue boxes of high-end jeweler Tiffany, said Reuters.

Chinese spending on luxury goods is forecast at $9.8 billion this year, against $65 billion in the US, $87 billion in Europe and $28 billion in Japan, according to the global consultants Bain & Company.

Money-saving middle men

One mainland luxury shopping website, Beijing-based eushophq.com, which was launched in 2008, saw a monthly sales growth of about 40 percent this year, said Liu Zheng, a eushophq.com manager.

The profit margin of average shopping website reached 600 percent even during chillier times of the global recession, said a manager of another shopping website who declined to be named.

In addition to eushophq.com, there are nine other well known luxury shopping websites such as Shanghai-based 51bangde.com, Guangzhou -based yide. com and Shandong Province-based usashipcn.com as well as many smaller operations on taobao.com that cater to the same up-scale, price-conscious Chinese consumers.

If a Chinese shopper wants to buy a luxury item in a domestic franchise store, he or she needs to pay tariff of 15 to 25 percent, a value-added tax, and sales tax charged for luxury goods, said Wang Fang, customer manager of usashopcn.com, a luxury shopping site targeting at US luxury brands.

 

But the price of an item bought through a website can be 20 to 50 percent cheaper than in a domestic franchise store, said Liu of eushophq.com.

The website's US office buys the goods after the orders are placed and sends them to the website's China office through international delivery, and then to the customer via domestic delivery, the website told Global Times.

The customers need to pay for all the delivery fees and pay the website a commission of 10 percent of the original goods price. Usually the goods are purchased in tax-free US states such as Montana, New Hampshire and Oregon to cut costs, said Wang.

The goods are claimed for individual use at China customs, so usually, the tariff can be avoided. According to China's tariff regulations, luxury goods for personal use and worth below 5,000 yuan ($732) are tariff-free.

The tariff-avoiding means of the websites is not illegal, Wang Surong, professor with Beijing-based University of International Business and Economics, told Global Times when questioned if it is smuggling.

The websites also collect sales information on various luxury brands and post it on their websites, said Wang.

However, there are doubters. Li Yanhong, a Shanghai-based manager with a medical equipment export company, is one.

"I would like to buy them from a Shanghai store," said Li. "Or travel to the US or Europe and buy them myself, rather than through a website. I guess those who can afford luxury goods would not hesitate to pay 30 percent more for what they like, and I think it would be very troublesome to deal with any dispute that might come along from this sort of online shopping."

But there are more, such as Zhang Haihong, a doctor in Shandong's Ji'nan city, who recently ordered a bottle of Chanel perfume from eushophq.com as a wedding gift for one of her friends. She paid 539 yuan ($80), but the same perfume was priced at 837 yuan ($123) at a local department store.

"I often buy cosmetics from here," said Zhang. "Mostly because it is cheap," said Wang, "Its discounts are higher than (many high end department stores) during festivals."

Reuters contributed to the story

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