DCF and vIndustry oaluation pverview arameters PPage 63age 63 I Points of view from EY global sector Chinese appetite for luxury goods and brands reshapes the luxury and other industry professionals landscape The Middle Kingdom Interestingly enough, China is far from being the Accounting for roughly one-third of the total tax-free preferred country for domestic luxury purchases. pmrchases in *()-, ;hina oas the first ÉLax >ree Three main factors may explain this paradox: Shopper Nation” according to Global Blue, a global strengthened anti-corruption laws in Mainland China 1 and Hong Kong, Chinese consumers’ willingness to leader in tax-free sales. Lhis figmre is enen more impressive when considering that Hong Kong scores live an authentic brand experience by buying luxury Amaury Bonnaire 10th in the same ranking. However, Chinese products locally, and last but not least, better prices consumers did not complete the most tax-free elseohere dme to inÖation in ;hina, foreign exchange w Executive Director, TAS transactions (Russian consumers completed the rates and high taxes and custom duties in China Geneva, Ernst & Young SA (about 30% for imported watchmaking and 50% for ervie most!, ohich means that ;hina is first in this rancing v not because it is the most populous country, but cosmetics). try o because Chinese consumers bought expensive As a result, Chinese consumers prefer to make luxury Indus items È first and foremost, oatches and beoelrq hard goods purchases while traveling abroad. When luxury goods), also according to Global Blue. As a traveling in Europe, more than 81% of Chinese matter of fact, the Fung Business Intelligence Centre travelers will shop with a budget as high as €3,544. values the yearly Chinese tax-free spending at Chinese travelers represent a crucial opportunity for US$200b in 2015 — a value that is expected to more luxury retailers — especially since they typically only than domble in the next fine qears.2 have a few holidays during which to travel. One of Fabian Denneborg them is the “National Day” holiday week in early October. In 2015, with a weak yen and during this Executive Director, TAS so-called “Golden Week,” around 400,000 Chinese Zurich, Ernst & Young AG tourists spent some US$830m in Japan.3 Being able to capitalize on those Chinese travelers represents a crucial issue for the European luxury industry. 1 “Global Blue releases the Globe Shopper Report: China Edition,” ?lobal :lme oebsite, accessed nia http2''corporate.globalblme.com' pressÈcentre'globalÈblmeÈreleasesÈtheÈglobeÈshopperÈreportÈchinaÈ edition', *( 9pril *()., ?lobal :lme, *().. 2 3 “Report: Outbound Chinese Traveler Spending to Hit $422 Billion,” Jing “Tax Free Shopping in 2015: a year in review,” Global Blue website, Daily, *, Keptember *()-, Bing