The Power of Retail

The weakening of the dollar has led to an increase in foreign holiday shoppers coming to the the US. The real problem will occur when retailers start rebuilding their inventories of luxury and status oriented goods next year, with overseas manufacturers begin to pass on higher prices to the stores, which in turn will increase prices for shoppers next year. According to Peter Schiff, CEO of brokerage firm Euro Pacific Capital, “When tourists are coming they are not buying the stuff that we make. They are buying the stuff that we imported. U.S. retailers are getting a shot in the arm, but by next year, the discrepancy won’t be there.”

Prices of European clothes, handbags and shoes have already risen, with some luxury retailers increasing prices by as much as 20%. Increasingly, consumers are becoming wary of paying the higher prices for European designer clothes. Tiffany & Co.’s super third-quarter results were all due to foreign shoppers, with roughly half of its 25% sales increase due to international shoppers.

So, while right now US retailers are happy with the tide of foreign shoppers, next year is not going to look so good. New York is the number one destination for foreign visitors and retailers in the city such as Manolo Blahnik and FAO Schwarz are both opening stores on Sundays and even on Christmas Day to take in more foreign shoppers.

New York’s foreign visitors have increased by 3.5% this holiday season from last year according to the NYC & Company, which is the city’s official tourist and marketing organization. The city expects a total of 8 million visitors this year, an increase of 11% for the entire year. The important fact is that foreign shoppers are spending more, significantly more to around $1,750 per person from $1,400 two years ago.

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