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Could the days of smuggling luxury goods be over?
2016-04-18
By Doug Young

A story this week about a woman busted after trying to smuggle thousands of yuan worth of makeup and luxury goods through Pudong International Airport brought a big smile to my face, jogging some of my earliest memories of living in Asia in the 1980s. Back then, luxury goods were just taking off in some of the region’s newly emerging “tigers” the same way they are now in China.

Nowadays such smuggling is far less common even here in China, since many consumers have more than enough money to easily travel to places like France, where they can legally purchase Gucci handbags and Cartier watches. And prices for luxury goods in China itself are also coming down these days, as many brands roll out global uniform pricing policies to discourage the kind of smuggling in the Pudong airport story.

More broadly, the story also reflects China’s rapid economic rise over the last two decades that has propelled it to the world’s third biggest market for luxury goods, behind only the US and Japan. If you would count the number of Chinese who travel abroad to buy such items, I wouldn’t be surprised if they collectively made up the world’s single largest group of buyers of luxury goods.

The story that caught my attention involved a woman who was nabbed after returning to China from Osaka on a flight operated by budget carrier Spring Airlines — slightly ironic considering that she was carrying so many luxury goods. Customs officials must have become suspicious at the amount of her luggage, and on inspection discovered 40,000 yuan (US$6,172) worth of cosmetics and luxury goods in her bags. That included six Issey Miyake handbags, and more than 300 containers of lotion and facial masks.

The woman quickly confessed that she was planning to use some of the products herself and sell the rest to friends. I suspect that she was mostly planning to do the latter, since a check of her passport revealed that she had traveled to Japan or South Korea every month over the last year, most likely on similar trips.

This kind of story probably happens quite regularly, and reflects the huge appetite for luxury goods here in Shanghai and most major Chinese cities over the last few years. That was hardly the case back in the 1980s and early ‘90s when I first lived in China, and people on average earned 100 yuan or less per month, or about US$20 based on rates back then.

One of my memories from that time was having to fill out a form each time I entered the country, declaring any valuable items I had, such as cameras, watches and jewelry. That seemed to be aimed at preventing foreigners from selling their personal items in China, and I remember that there was quite a strong black market at the time for even the simplest cameras and other electronic equipment.

Back then, emerging markets like Korea were ahead of the curve in terms of demand for conventional luxury goods like designer clothes and bags. In those days, when I lived in Taipei, many of my friends and I were relatively poor and survived on modest salaries by teaching English a few hours a week. Our visas also required us to leave Taiwan Province every six months, which raised the expensive proposition of having to spend at least a few hundred dollars to go to nearby areas like Hong Kong or Korea.

Some local entrepreneurs took advantage of that situation and offered free trips for young foreigners like myself who were willing to wear some expensive designer clothing, jewelry and sling a pricey camera around their neck, and carry a bag filled with cosmetics and other luxury items for short trips to Korea or Hong Kong. I was too nervous to ever make such a trip, but many of my friends were a little bolder.

One even got busted once by Korean customs, which led to some tense moments and confiscation of her items before she was released. She would later recall that her contacts didn’t penalize her for getting caught, but that she was too unnerved by the experience to ever try it again.

This kind of activity continues to this day and — although the scale is smaller — many friends often ask me to buy them a luxury bag, iPhone or other luxury product when I go abroad. When I was living in Hong Kong just a decade ago, one of my mainland colleagues came to visit for work and had to buy an entire new suitcase to haul back all the imported cosmetics he bought for his wife and her friends. At the end of the day such buying is really all about supply and demand imbalances due to the youth of China’s luxury goods market, and I suspect such activity will soon become just a memory.


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