Bloomberg News

Suitcases of Overseas Shoppers Aid U.S. Exports: Economy (1)

September 23, 2013

Stuffed Suitcases of Overseas Shoppers Aid U.S. Exports

Pedestrians walk past mannequins in the window of a shop in the Soho district in New York City. Photographer: Craig Warga/Bloomberg

Vivian Leite needed a new suitcase to tote $5,000 worth of goods from her one-week U.S. shopping trip back home to South America.

“The variety of goods is unbelievable in the U.S.,” the 40-year-old veterinarian from Rio de Janeiro said Sept. 15 while shopping near Miami with 11 of her friends. “I came with one piece of luggage but I can tell I’ll need a second one to get back home.”

Leite is among a growing number of tourists from countries including China, India and Argentina who are pouring into America’s shopping malls to snap up everything from Apple Inc. (AAPL:US) iPhones to Coach Inc. (COH:US) handbags that carry cheaper price tags in the U.S. So-called tourism exports, or the value of products and services purchased by visitors from abroad, have climbed to a record, boosting the economy and employment.

“The travel industry so far this year has accounted for more than a quarter of our country’s growth in exports, so it’s incredibly important,” said David Huether, senior vice president of research at U.S. Travel Association, a Washington-based non-profit organization representing the industry. “People come here, spend money, and support jobs.”

Tourism exports rose to a record $14.9 billion in June. They accounted for 32 percent of the gain in total sales to overseas customers during the first seven months of the year, Commerce Department figures show. That’s almost three times the share in the same period last year.

International Arrivals

The number of people visiting the U.S. is on the rise, and their spending is growing even faster. International arrivals increased 6.4 percent in the first quarter compared with a year earlier, Commerce Department data showed last week. Outlays in the same period rose 10.6 percent. For all of 2012, traffic climbed 6.1 percent and spending rose 8.7 percent.

Exchange rates, tariffs and less competition in some countries help explain why merchandise sold overseas can be more expensive than in the U.S., according to Chen Grazutis, an analyst with Bloomberg Industries.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, fell 0.2 percent to 1,011.81 at 4:05 p.m. in New York, after falling 1 percent last week.

Even as growth in some countries such as China and Russia cool and the purchasing power of currencies, including the Argentine peso, declines, visits to the U.S. haven’t skipped a beat.

Better Deals

Shoppers are finding better deals on a variety of goods in the U.S. Apple’s new iPhone 5s, which went on sale last week, costs $649 without a contract for mobile phone service, while the same model on Apple’s site for Chinese customers is advertised at 5,288 yuan, or around $864.

Brazil’s Apple website didn’t offer a 5s model as of Sept. 18, though the 16 gigabyte iPhone 5 it did have listed was priced at $2,299 reais, or $1,040. Verizon Communications Inc.’s wireless unit is advertising the same smartphone in the U.S. for $549.99 without a contract.

Coach’s Madison Phoebe shoulder bag costs $398 on the New York-based company’s website. The bag with a similar description is listed on Coach’s Chinese website for 4,950 yuan, or about $809.

American retailers are also benefiting from growing middle classes around the world, Huether said. People from Colombia, Venezuela, China, Argentina, Taiwan and Brazil showed the biggest increases in visits among the U.S.’s top 20 tourist-originators as of March, the most recent Commerce data show. Those trends were similar to 2012 results, even as Western Europe posted a 2 percent visitation decline because of a recession.

Bigger Budgets

Travelers from China and India spent more than $6,200 per capita in 2012, while visitors from Argentina and Brazil spent more than $5,000. French residents, by comparison, spent $3,654, based on U.S. Travel Association calculations of Commerce data.

“For a lot of these countries where there is an emerging middle class, this is their first time traveling in the United States, and they take longer trips,” Huether said. They also dedicate a larger budget.

Gustavo Torretta said he saved about $25 on shoes by shopping in Miami rather than at home in Buenos Aires.

“I’ll probably spend about $800 here today,” said Torretta, 36, toting luggage as he stood on a bustling walkway outside of the Rainforest Cafe at the Sawgrass Mills outlet mall in Sunrise, Florida. “There’s always complications with the exchange rate, but the prices here are still so much better that it’s worth it.”

More Variety

The broader range of goods is a draw for others, such as Leite, who was browsing at a T.J. Maxx store in Sawgrass Mills.

“If you go shopping for a vacuum in Argentina, you might find just one model,” she said. Leite, who splits her time between Buenos Aires and Rio de Janeiro, said currency fluctuations do “not at all” impact her shopping or traveling. “Here you get the whole package.”

Leite and Torretta are among overseas tourists and shoppers who may help make up for a decline in the number of Americans taking vacations. The number of U.S. employees not at work because they were on holiday fell to 24.7 million through August from 25.9 million the prior year, according to Labor Department data. That compares with 30 million in 2007, before the last recession.

“We’re seeing the recovery absolutely fall flat” for U.S. leisure travelers, said Marcello Gasdia, an analyst at Sherman, Connecticut-based PhoCusWright Inc., a travel research provider.

“They’re shifting their attention to the big-ticket items that kind of piled up on the backburner” during the last recession, he said. “The home improvements, the car industry is doing well. They’re going to pay attention to these things before the $5,000 family trip.”

Travel Spending

Even with the decrease in vacations, the U.S. Travel Association projects domestic travel expenditures -- which include business travel -- will increase 3.6 percent this year, compared with a 4.4 percent improvement in 2012. Including a projected 5.8 percent gain in international expenditures, travel spending will grow 3.9 percent, they estimate.

The pickup in tourism from abroad is prompting cities and companies to market themselves to foreigners. Air China Ltd. (601111) opened a Beijing-to-Houston direct flight in July, and Jorge Franz, vice president of international sales and tourism at Houston’s convention and visitor’s bureau said the city is looking for a boost in Asian visitors.

“International travelers spend a lot more than domestic travelers, in most cases up to twice as much,” Franz said, adding that they frequent high-end Gucci Group NV and LVMH Moet Hennessy Louis Vuitton SA shops. Tourists from “the BRIC economies are a real phenomenon for Houston,” Franz said referring to Brazil, Russia, India and China.

Outlet Malls

They’re also a boon for Sawgrass Mills, where Leite and Toretta shopped. The outlet mall, with more than 350 stores near Miami, attributes more than half of sales to international visitors, said Luanne Lenberg, the mall’s general manager.

“We see a propensity to shop brands -- they can be luxury brands, they can also be strong American brands,” Lenberg said of the mall’s international visitors. “We are looking at emerging markets such as China and India, and others, and those will be very important to develop further.”

To contact the reporters on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net; Bill Faries in Miami at wfaries@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • AAPL
    (Apple Inc)
    • $98.38 USD
    • -0.64
    • -0.65%
  • COH
    (Coach Inc)
    • $34.35 USD
    • -0.30
    • -0.87%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus