Business     

Stores see boost from 'traveling luxury consumers'

China Daily, January 18, 2012

• Chinese shoppers again greatly boosted the sales recorded by the British luxury goods giant Burberry Group Plc this past Christmas, the company said in its third-quarter trading announcement on Tuesday.

  Burberry, the luxury brand famous for its camel, red and black check pattern for textiles, reported revenue had increased by 22 percent to reach 574 million pounds ($882 million) in the last three months of 2011. The same period saw its revenue from China increase by about 30 percent - the same rate that it had in the second quarter.

  The double-digit growth figures were announced amid a gloomy time for Britain's retail industry. The value of British retailers' sales in December increased by 4.1 percent year-on-year, according to statistics from the British Retail Consortium.

  Stacey Cartwright, Burberry's finance director, said the "traveling luxury consumer" - a phrase referring to a Chinese tourist who spends more abroad than at home - gave Burberry a boost in London, Paris, Hong Kong, Las Vegas and other important markets for the company.

  Angela Ahrendts, Burberry's CEO, coined the term "traveling luxury consumers" to describe shoppers who believe that being able to say they had bought something in London adds prestige to their purchases.

  The benefits that come from such customers do not fall exclusively on Burberry.

  When Selfridges, a luxury department store in London's Oxford Circus, held a post-Christmas sale this past year, the store enjoyed the most profitable period in its history, raking in 1.3 million pounds in an hour. And much of the credit for those results went to Chinese tourists.

  The World Luxury Association, an international non-profit organization specializing in the management of luxury brands and market research, noted that Chinese tourists spent 33 billion pounds in Europe in 2011.

  The brokerage and investment group CLSA forecasts that China will become the largest market in the world for luxury goods in five years.

  Recognizing the opportunities presented by the burgeoning Chinese middle class, Burberry took control of its franchised stores in China for 70 million pounds in 2010.

  The company expects its acquisition of 50 stores and other assets from its franchise partner Kwok Hang Holdings Ltd to add as much as 20 million pounds to its operating profits in the 2011-2012 financial year. Since the acquisition, Burberry has increased the number of stores it has in China to about 60.

  Meanwhile, economic conditions continue to present difficulties for most European retailers. Stephen Robertson, director-general of the British Retail Consortium, warned that "2012 is expected to be an equally challenging year" for most British retailers.

  Fears of economic turmoil are prevalent in the eurozone after Standard & Poor's Financial Services LLC decided on Friday to downgrade the credit ratings of France and eight other eurozone nations.

  And even China, it seems, is not immune to the global downturn. Investors are growing increasingly concerned about the effect of current economic conditions on the confidence of the Chinese middle class.

  Cartwright, for her part, remains convinced that Burberry's sales figures will receive another boost from the Olympic Games that will be held in London in July. She said the company is on track to open its largest flagship store in the UK just ahead of the Olympics. It will be on Regent Street, London's fashion hub near Oxford Circus.

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