Monday, August 5, 2024
Reading Time: 3 minutes
Japan has become a hotspot for tourists eager to purchase luxury clothing and handbags at reduced prices, thanks to the weak yen. This surge in visitors seeking high-end deals is not welcomed by luxury brands like LVMH, the parent company of Louis Vuitton, which prefers customers to shop locally.
The significant devaluation of the yen, which recently plummeted to a 38-year low against the dollar before stabilizing, has fueled an extraordinary influx of tourists. This currency-driven shopping spree is attracting astute buyers from across Asia and beyond.
The depreciation of the yen has ignited a unique tourism boom, drawing in bargain hunters looking for premium goods. While this is a boon for Japan’s tourism sector, luxury brands are not as thrilled, as they would rather see consumers spending in their home markets.
Global luxury brands are facing challenges as their products, from designer sneakers to fine whisky, have become cheaper in Japan due to the weak yen, affecting their profit margins.
Chinese tourists, in particular, are postponing their luxury purchases at home to take advantage of the lower prices in Japan. The fluctuating yen makes it difficult for companies to adjust prices to match currency changes, resulting in reduced profits in the Japanese market while the yen remains weak.
Zhang Lei, a 29-year-old DJ from Hunan province, is experiencing Japan for the first time and is already eager to return, highlighting the allure of Japan’s discounted luxury goods for international travelers.
In the vicinity, around 15 individuals lined up to access the Louis Vuitton boutique, using fans to cool themselves in the intense heat.
DIOR, CHANEL, MOUNT FUJI
In China, the coveted Louis Vuitton Alma BB handbag is priced at 14,800 yuan, which equates to about $2,050. However, in Japan, the same handbag is available for 279,400 yen, or approximately $1,875. During the yen’s recent low, buyers could snag this handbag for an even more attractive price of $1,725.
The yen would need to appreciate to around 136 to the dollar for the handbag’s price in Japan to match that in China. As of Thursday, the currency stood at 149.30, nearing its strongest level in four and a half months.
Chinese tourists are also driving up sales of luxury spirits in Japan, according to drinks maker Remy Cointreau.
Remy Cointreau CFO Luca Marotta noted during the company’s first-quarter sales call that Japan saw strong sales growth due to tourism and the weak yen, despite the lower profit margins. Similarly, Swiss luxury group Richemont, which owns Cartier, reported a nearly 60% increase in Japan sales in the first quarter, spurred by tourists from China, Southeast Asia, and the United States.
Japan welcomed a record-breaking 3.1 million foreign visitors in June, according to official data released last month. This surge positions the country to surpass its previous annual record of nearly 32 million foreign arrivals set in 2019, before the pandemic halted global travel.
The government projects that tourist spending will reach 8 trillion yen ($54.74 billion) this year, viewing tourism as a key growth engine for an economy challenged by an aging population.
Yadwinder Singh, a 26-year-old from New York, hadn’t planned on shopping extensively until he noticed the significantly lower prices at fast-fashion retailer Zara and other stores. “Clothes, jewelry, shoes – the whole outfit,” Singh remarked, as he took advantage of the bargains.
($1 = 7.2171 Chinese yuan renminbi)
($1 = 148.8700 yen)
link
