U.S. Travelers’ Shopping Spree in Paris, When Los Angeles resident An Dyer planned a trip to Paris in January, scoring a new luxury handbag was top of her priority list.
Ms. Dyer, who splits her time between working in technology sales and blogging about fashion, didn’t buy just one bag. She went on a shopping spree, snapping up bags from Chanel, Gucci and Louis Vuitton and reaping an unexpected windfall provided by the slide in the euro’s exchange rate.
“The prices [in Paris] were better—I mean dramatically better,” says Ms. Dyer. She had set aside 4,000 to 5,000 euros for her European shopping, but when she saw how much lower prices were than she had expected, she decided to spend more—for a total of about 8,000 euros, or $8,560—on luxury goods. “I couldn’t pass it up,” she says.
The fall in the value of the euro against the dollar and other currencies has exacerbated a glaring price gap between luxury goods sold in Europe and those sold in the rest of the world. Some labels can now cost up to 30% more in the U.S. than in Europe after conversion of prices to comparable currency. Six months ago—before the euro fell by more than 15%—the price difference was variable but on average under 10% and in some cases prices actually worked out to be cheaper in the U.S.
For instance, a Gucci “Jackie” soft leather hobo bag costs 2,500 euros when purchased at the label’s own stores in Europe, the equivalent of $2,675 at current exchange rates. Yet the bag retails in U.S. stores for $2,990. Prada’s Saffiano handbag sells for $2,350 in the U.S., 33% more than its 1,650 euros ($1,766) price tag in Europe.
The gap has become a magnet for savvy travelers. Already, spending on tax-free shopping by U.S. travelers jumped 37% in the first three months of 2015, compared with the same period last year, according to Global Blue, a Swiss-based firm that processes sales tax refunds for non-EU tourists.
Though U.S. nationals continue to spend disproportionately on souvenirs and gifts, they are increasingly showing an interest in watches, jewelry and leather goods and bags, says Duncan Skehens, a spokesman for Global Blue. U.S. travelers have to declare their purchases when they return to the U.S. and pay the applicable duty.
Shoppers who aren’t able to fly to Paris may turn to “concierge services,” or personal shoppers who buy products at stores in Europe and ship them to the U.S. or elsewhere.
Some consumers also shop for high-end totes through online resellers with websites like collectorsquare.com or therealreal.com. Though their main business is selling secondhand luxury goods, some also have a small proportion of luxury handbags with price tags still attached.The currency divergence has created a dilemma for luxury brands. Droves of overseas shoppers in recent years have supported sales in Europe, where bags and other luxury staples typically have been somewhat cheaper than elsewhere. But the current price gap, which is far beyond any historical norm, is fueling a flourishing parallel market of people who buy handbags in Europe and resell them overseas.
This makes many luxury marketers uneasy. “Customers are buying real Hermès products in an environment which is not Hermès,” said Guillaume De Seynes, an executive director at the French firm.
Hermès, maker of the prestigious Birkin and Kelly bags, is taking a close look at its pricing policy in light of recent currency variations, according to Mr. De Seynes.
More than other brands, Hermès has long had to contend with parallel trade, also known as the gray market, as customers look for alternatives to retail, where there are often waiting lists to buy the most prized Hermès bags. The currency gap is giving U.S. customers even more motivation to seek other channels: While retail customers in France now will pay at least 6,700 euros ($7,169) for a coveted Birkin bag, an entry-level model of the bag retails for at $11,000 in the U.S.
Chanel disclosed last month it would slash prices in China on some bags, raise prices in Europe and freeze prices in the U.S. The decision sparked a stampede, and certain models sold out in many stores across Europe in advance of the April 8 price hike.Rima Abas-Fidalgo is a personal shopper and buyer of luxury clothes and accessories in Paris for overseas clients, who pay her a commission. She says her job has become more difficult as companies try to curb reselling. Brands “do everything so that people like me can’t buy for others,” she says. Brands are also cracking down on the number of bags one person can buy from any one store.
Rema Awad, a 33-year-old lawyer in New York who is planning a trip to Paris in May, said she was “hysterical” to discover that her plan to buy a new Chanel jumbo black Caviar flap bag with gold hardware in Europe was hitting the hurdle of the price hike.
“My husband put in calls to American Express asking, ‘How can I get this handbag for my wife?’ ” Ms. Awad says.
The company put her in touch with Ms. Abas-Fidalgo before the price hike took effect. In March, Ms. Abas-Fidalgo went into the Chanel store in Paris and picked up the bag for 3,950 euros (or $4,227). Currently the bag costs 4,750 euros (or $5,083) in Europe and retails in the U.S. for $5,500.
Other big luxury houses don’t appear inclined to follow Chanel’s lead, suggesting the price gap isn’t about to disappear. Many large sellers of pricey goods prefer to continue generating volume sales by catering to tourists visiting Paris, Milan and elsewhere.Louis Vuitton recently hiked the price of its Speedy 30 monogrammed canvas bag in Europe by 4% while keeping the price steady in markets such as the U.S. and China. Even after the increase, though, a customer in New York still will pay almost 30% more, with the bag costing $970 there, compared with 685 euros ($733) in Paris.
Louis Vuitton’s parent, luxury juggernaut LVMH Moët Hennessy Louis Vuitton, says it has no plans to harmonize prices globally.
Firms shouldn’t make “emergency” decisions, regarding currency effects, said Jean-Jacques Guiony, chief financial officer at LVMH, which also owns Céline, Fendi and other luxury brands. “What currencies have done, currencies can undo,” he said
“The prices [in Paris] were better—I mean dramatically better,” says Ms. Dyer. She had set aside 4,000 to 5,000 euros for her European shopping, but when she saw how much lower prices were than she had expected, she decided to spend more—for a total of about 8,000 euros, or $8,560—on luxury goods. “I couldn’t pass it up,” she says.
The fall in the value of the euro against the dollar and other currencies has exacerbated a glaring price gap between luxury goods sold in Europe and those sold in the rest of the world. Some labels can now cost up to 30% more in the U.S. than in Europe after conversion of prices to comparable currency. Six months ago—before the euro fell by more than 15%—the price difference was variable but on average under 10% and in some cases prices actually worked out to be cheaper in the U.S.
For instance, a Gucci “Jackie” soft leather hobo bag costs 2,500 euros when purchased at the label’s own stores in Europe, the equivalent of $2,675 at current exchange rates. Yet the bag retails in U.S. stores for $2,990. Prada’s Saffiano handbag sells for $2,350 in the U.S., 33% more than its 1,650 euros ($1,766) price tag in Europe.
The gap has become a magnet for savvy travelers. Already, spending on tax-free shopping by U.S. travelers jumped 37% in the first three months of 2015, compared with the same period last year, according to Global Blue, a Swiss-based firm that processes sales tax refunds for non-EU tourists.
Though U.S. nationals continue to spend disproportionately on souvenirs and gifts, they are increasingly showing an interest in watches, jewelry and leather goods and bags, says Duncan Skehens, a spokesman for Global Blue. U.S. travelers have to declare their purchases when they return to the U.S. and pay the applicable duty.
Shoppers who aren’t able to fly to Paris may turn to “concierge services,” or personal shoppers who buy products at stores in Europe and ship them to the U.S. or elsewhere.
Some consumers also shop for high-end totes through online resellers with websites like collectorsquare.com or therealreal.com. Though their main business is selling secondhand luxury goods, some also have a small proportion of luxury handbags with price tags still attached.The currency divergence has created a dilemma for luxury brands. Droves of overseas shoppers in recent years have supported sales in Europe, where bags and other luxury staples typically have been somewhat cheaper than elsewhere. But the current price gap, which is far beyond any historical norm, is fueling a flourishing parallel market of people who buy handbags in Europe and resell them overseas.
This makes many luxury marketers uneasy. “Customers are buying real Hermès products in an environment which is not Hermès,” said Guillaume De Seynes, an executive director at the French firm.
Hermès, maker of the prestigious Birkin and Kelly bags, is taking a close look at its pricing policy in light of recent currency variations, according to Mr. De Seynes.
More than other brands, Hermès has long had to contend with parallel trade, also known as the gray market, as customers look for alternatives to retail, where there are often waiting lists to buy the most prized Hermès bags. The currency gap is giving U.S. customers even more motivation to seek other channels: While retail customers in France now will pay at least 6,700 euros ($7,169) for a coveted Birkin bag, an entry-level model of the bag retails for at $11,000 in the U.S.
Chanel disclosed last month it would slash prices in China on some bags, raise prices in Europe and freeze prices in the U.S. The decision sparked a stampede, and certain models sold out in many stores across Europe in advance of the April 8 price hike.Rima Abas-Fidalgo is a personal shopper and buyer of luxury clothes and accessories in Paris for overseas clients, who pay her a commission. She says her job has become more difficult as companies try to curb reselling. Brands “do everything so that people like me can’t buy for others,” she says. Brands are also cracking down on the number of bags one person can buy from any one store.
Rema Awad, a 33-year-old lawyer in New York who is planning a trip to Paris in May, said she was “hysterical” to discover that her plan to buy a new Chanel jumbo black Caviar flap bag with gold hardware in Europe was hitting the hurdle of the price hike.
“My husband put in calls to American Express asking, ‘How can I get this handbag for my wife?’ ” Ms. Awad says.
The company put her in touch with Ms. Abas-Fidalgo before the price hike took effect. In March, Ms. Abas-Fidalgo went into the Chanel store in Paris and picked up the bag for 3,950 euros (or $4,227). Currently the bag costs 4,750 euros (or $5,083) in Europe and retails in the U.S. for $5,500.
Other big luxury houses don’t appear inclined to follow Chanel’s lead, suggesting the price gap isn’t about to disappear. Many large sellers of pricey goods prefer to continue generating volume sales by catering to tourists visiting Paris, Milan and elsewhere.Louis Vuitton recently hiked the price of its Speedy 30 monogrammed canvas bag in Europe by 4% while keeping the price steady in markets such as the U.S. and China. Even after the increase, though, a customer in New York still will pay almost 30% more, with the bag costing $970 there, compared with 685 euros ($733) in Paris.
Louis Vuitton’s parent, luxury juggernaut LVMH Moët Hennessy Louis Vuitton, says it has no plans to harmonize prices globally.
Firms shouldn’t make “emergency” decisions, regarding currency effects, said Jean-Jacques Guiony, chief financial officer at LVMH, which also owns Céline, Fendi and other luxury brands. “What currencies have done, currencies can undo,” he said
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