Chinese tourists spent record amounts on luxury items last month due to low prices in Europe caused by the weakening Euro, according to figures from VAT refund company Global Blue.
Luxury spending by Chinese tourists rose 122 percent in March after increasing 52 percent in February, reports Channel News Asia. Overall, luxury spending rose 67 percent during the first quarter, a huge gain when compared to the 32 percent spending increase in the fourth quarter of 2014 and an 18 percent overall gain in 2014.
“This continues to reflect the redirection of Chinese spending from Hong Kong towards Europe in particular, given the widening of the price differentials, which is a much-discussed theme during the ongoing reporting season,” commented brokerage firm Barclays.
Worldwide tourism spending increased overall in March, reaching its highest point since May 2011. Watches and jewelry performed the best, as sales climbed 67 percent in March after a 32 percent gain in February. Leather goods sales rose 50 percent in March after climbing 24 percent the previous month.
For Chinese consumers, the euro’s decreasing value means prices are cheaper in Europe by as much as 50 percent, or more, compared to China, which has led to an increase in parallel imports and gray market luxury goods. In fact, investment bank J.P. Morgan Cazenove estimates that between 20 and 40 percent of all luxury sales in mainland China are now parallel.
To combat the price differences, luxury brands are adjusting their prices regionally. In February, Swiss watch maker Patek Philippe lowered prices in Hong Kong by up to 22 percent to combat parallel imports from Europe. Similarly, in March, Chanel cut prices by as much as 20 percent in China on many of its product lines with prices on additional goods leveling out throughout the year.
Kering is expected to announce similar price cuts, specifically for its flagship Gucci brand, when it announces its first quarter figures.