>>A different kind of package holiday
Jul 12th 2001 | HONG KONG
From The Economist print edition
Amateur wholesalers are in an upmarket retail store near you
THE same Louis Vuitton handbag costs about 40% more in Japan than in France. To economists, this is a market imperfection begging for arbitrage. And Hong Kong, that bastion of entrepreneurship, is obliging. Here is how.
Nine Hong Kong Chinese recently spent a fortnight travelling through Europe. They started in Frankfurt and ended in Rome, passing through one city a day. Early every morning, a van picked them up from their hotel and drove
them to the first Louis Vuitton store on the day’s agenda. It parked around the corner, and the Chinese entered the store in pairs. They each bought as many Louis Vuitton handbags as they could carry and then returned to the
van, in order to be transferred to the next store.
It was gruelling work, complains a girl from the van. She, like the rest of the group, went on the trip because it
was an all-expenses-paid way to see Europe. (In fact, those who bought more than their quota of handbags even
earned a bonus.) But the itinerary did not allow for any sightseeing at all, and for meals the group ate Chinese
takeaway in the van. The sales staff in the stores tended to be rude: the tour’s “boss”, says the girl, had
expressly asked for bags “with a certain monogram pattern” that is all the rage in Japan, and one shop simply
refused to sell her the nine bags she brought to the counter.
The boss never introduced himself to the group, but when his troops returned he stood nearby in the arrivals hall
at Hong Kong’s airport, watching them claim their luggage. His business seems to be going well—another tour group is apparently already on the way. Savvy Hong Kong tourists claim to know of several competing organisers—an industry, in other words. Nor is Louis Vuitton the only target: Gucci tours have also taken place.
Should companies whose prices are being arbitraged in this way mind? Louis Vuitton’s European sales benefit from such tourism, after all. “We definitely do not think that a sale is a sale,” complains an irate spokeswoman in Paris “It took 150 years to build this brand,” she says, and losing part of the retail network to a netherworld of shady Asians damages it. So Louis Vuitton, along with other owners of luxury brands, is working with the authorities to crack down on such tourism. This is tricky, not only because the arbitrageurs tend to pay cash, but also because Louis Vuitton would hate to confuse them with its genuine customers from Asia, who have also been known to binge on bags.<<
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