Holiday Shopping; Consumers from Russia, China and India tend to look local but buy global.(Cover story)

Byline: Emily Flynn Vencat

The Chinese may be en route to becoming the world's top luxury-goods consumers, but luxury sales in China are still shockingly low. That's because the resident rich do almost all their shopping abroad. For every dollar they spend at home on luxury goods, they spend three during trips to such places as Hong Kong, Europe and Japan. Sales in mainland China account for only 2 percent of the global luxury trade, but Chinese buyers are responsible for 11 percent of overall sector sales.

It's not hard to explain the discrepancy. In emerging economies taxes are high, accessibility of luxury shops is often low and, as more people travel abroad, it follows that they would shop more on holiday. Although import taxes have been falling in China, diamond rings, for example, still carry 70 percent duties. Russia is phasing out high tariffs in preparation for entry into the World Trade Organization, but luxury cars still cost 25 to 50 percent more in Moscow than in Europe. Indians face taxes of between 40 and 100 percent on luxury products from Jaguars to jewelry. And since there are no luxury shopping districts, most boutiques face a precarious existence, setting up shop in hotels that move quickly in and out of style.

Buying abroad ...