Britain Is Now The Cheapest Place To Buy Luxury Goods
SAABIRA CHAUDHURI and
SIMON ZEKARIA, www.wsj.com
Sterling has plunged, but makers of many designer brands haven’t yet raised prices
LONDON—Attention luxury shoppers: Britain is now the cheapest place to buy that coveted Louis Vuitton handbag.
Since Britain voted in June to leave the European Union, sterling has tumbled 17% as of Friday’s close, having set fresh three-decade lows last week. The fall has ratcheted up prices here of imported wine, electronics and even some cars. But most luxury-goods makers—protected by typically fat margins for their products—haven’t yet raised their prices. That has suddenly made the U.K. the least expensive market in the world for a bevy of luxury goods, according to analysts.
The low prices are drawing high-end tourist dollars, as spending in other top luxury-shopping destinations in Europe slump. Spending by foreigners on items for which buyers seek tax refunds—ordinarily big-ticket items—surged more than 36% in August in the U.K., compared with a year ago, according to a UBS analysis of data provided by Global Blue, a tax-refund service.
That compares to a fall of nearly 20% on the year for the same sort of purchases in France, where tourism has been laid low by a raft of terror attacks. In Italy, spending fell more than 11% in the same period.
“It’s definitely cheaper now,” said Dirk Hamann, a Berlin-based businessman emerging from the Valentino store on London’s Old Bond Street. Mr. Hamann and his wife Rika splurged, buying two jackets and a sweater at the store.
Especially price savvy are the throngs of Chinese shoppers who have flocked to Europe in recent years, picking up luxury items in bulk to take advantage of a lower euro and to avoid Chinese import duties. Many of these purchases end up on a vast gray market, where middlemen profit by reselling handbags and watches at a premium to European prices, but at a big discount to prices in Asia.
Chinese tourists have already ratcheted up purchases at Westfield Corp.’s two big London shopping malls, which include stores for British luxury firms like Aquascutum, Aspinal and Burberry, according to Myf Ryan, Westfield’s chief marketing officer for the U.K. and Europe.
“What we have seen is Chinese tourists bulk-buying designer items,” she said. Ms. Ryan said these tourists are buying an average of 10 items, or double the count from last year.
For all stripes of tourists, Britain is suddenly a much more affordable destination after the Brexit vote. Travel bookings for the period between October and December from the U.S. to Britain are up 6% from the year-ago period, according to VisitBritain, the U.K. tourism agency. Bookings from India are up 11%, and bookings from China are up 24%.
“We know that when people budget they budget in their own currency, which means their money goes so much further,” said Patricia Yates, director of strategy for VisitBritain.
For luxury shoppers, the savings can still be substantial, especially for visitors from the U.S. and Asia. According to an analysis of pricing conducted by Deloitte for The Wall Street Journal, a Speedy 30 handbag from Louis Vuitton cost £645 in London, or $802 as of this past Friday. That compares to €760 ($850) in Paris and $970 in New York. In China, the bag costs 7,450 yuan, or $1,115. A spokeswoman from LVMH Moët Hennessy Louis Vuitton SE declined to comment.
A men’s cashmere V-neck sweater from Brunello Cucinelli, meanwhile, cost £650 ($808) in London, compared with $940 in Paris, $995 in New York and $1,287 in China. A Brunello Cucinelli spokesman said “prices are defined at the launch of every new collection; as for protocol, garment prices are defined in each currency and realigned keeping them updated, based on their relative exchange-rate fluctuations.”
Jonathan Coen, the commercial director for London’s Heathrow Airport, says there has been a noticeable uptick in luxury sales there.
“Since the Brexit vote, Heathrow’s luxury brands have seen a significant increase in sales,” he said. Sales of jewelry and watches rose 16.6% in July from the year-ago period in Britain, according to Britain’s statistics agency.
Sales from bookings are up 9% on the year at Edwardian Hotels London, a privately owned chain of 11 upscale hotels in London.
“We’re seeing particular strength in our five-star hotels,” said the group’s director of revenue, Linton Wadsworth. “People are taking advantage of great dollar rates.”
At the Arch London, a boutique hotel near London’s fashionable Bond Street, demand has surged.
“We’ve noticed a big increase in overseas guests this quarter,” said the hotel’s finance director, Alon Bejerano.