Advertisement
Canada markets closed
  • S&P/TSX

    22,167.03
    +59.95 (+0.27%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CAD/USD

    0.7386
    -0.0001 (-0.01%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • Bitcoin CAD

    94,839.76
    -1,940.50 (-2.01%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • RUSSELL 2000

    2,124.55
    +10.20 (+0.48%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • NASDAQ

    16,379.46
    -20.06 (-0.12%)
     
  • VOLATILITY

    13.01
    0.00 (0.00%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • CAD/EUR

    0.6840
    -0.0003 (-0.04%)
     

Paris attacks: What it means for luxury retail

Paris attacks: What it means for luxury retail

Retail and luxury consumer goods have been in focus following the terror attacks in Paris last week, with analysts predicting a dent in demand due to declining tourism in the French capital.

France is one of the leading luxury markets in world, with people traveling from all over the globe for its world-renowned, extravagant goods. The European nation is home to brands like Dior (Euronext Paris: CDI-FR), Christian Louboutin, Givenchy (Euronext Paris: MC-FR) and Louis Vuitton.


In 2014, sales of luxury goods in France reached $20.2 billion, according to research from Euromonitor International. The current outlook for 2015 is $20.8 billion at current exchange rates, however, this is not taking into account the recent attacks in Paris.

ADVERTISEMENT

Caroline Bremner, head of travel research at Euromonitor, said the outlook for travel and tourism demand in Paris would likely see a "short to medium term" impact.

Thus, this has a potential knock-on effect for one customer France thrives on: the Chinese. This year, European luxury brands have already been hit by the devalued yuan (Exchange: CNY=) currency, which means it costs more for the Chinese consumer to buy these foreign brands.

China's anti-corruption drive and market volatility has also not helped. But now the French capital is seeing consumers change their flight schedules in the wake of the attacks.

Travel agencies in Chinese cities have been reporting cancellations—in the 50 percent range—of trips to Europe for the last two months of 2015 over this last weekend, as Chinese tourists have become more fearful.

The attacks could hurt business for the brands heavily reliant on Paris' influx of tourists, Stacey Widlitz, president of SW Retail Advisors, told CNBC Tuesday.

"If you look at France and Paris, it's the luxury destination for the tourists, particularly the Chinese. Even before this tragedy, we had issues with gangs in Paris attacking the Chinese because they know they carry cash," said Widlitz.

"Now we're talking about cancellations in terms of the Chinese coming there and spending. For some brands, as much as 70 percent of their business in Paris is tourism. So that could hurt."

In 2014, France was named the most visited country after 83.7 million tourists visited the European country, beating the likes of the United States and Spain, according to the United Nations' World Tourism Organization.

While Paris' shopping district wasn't impacted significantly following the Charlie Hebdo shootings—due to its "targeted" nature—one analyst suggests that concern surrounding general safety in parts of Europe, may impact luxury shopping sales.

"The recent mass shootings in Paris suggest the worst kind of risk, in scale and targeting. Therefore, there's clearly likely to be some concern about the general safety of Paris and wider France (potentially other parts of Europe too) in the short to medium term, particularly with the security of European border control in doubt," Winston Chesterfield, research director at Wealth-X, told CNBC via email.

"This might have an impact on seasonal luxury shopping in 2015. However, it is not likely this will be a long term issue. Paris is still going to be one of the top tourist destinations for luxury tourism and shopping."

"It is a highly developed, sophisticated and cosmopolitan city that welcomes luxury shoppers and offers an authentic European luxury experience, as well as competitive prices relative to some other domestic markets."

At the end of the day, Asian consumers prefer buying "made in Europe" products which is resonated through their travels, as purchasing in Europe adds an authentic experience, Chesterfield told CNBC in September.

While the attacks may impact the Parisian market now – so close to Christmas – luxury buyers are expected to return.

By CNBC's Alexandra Gibbs, follow her on Twitter @AlexGibbsy.



More From CNBC

  • Top News and Analysis

  • Latest News Video

  • Personal Finance