Give me your tired, your poor, your huddled masses seeking . . . to buy luxury goods?
One of the big themes of the past few years has been the influx of foreigners investing and spending in the U.S. As more people around the world grow wealthy, they want to live, eat, and shop like Americans. Brazilians have been snapping up condos in Miami while Russian oligarchs are falling over themselves to purchase trophy Manhattan real estate.
Luxury retailers like Saks are big beneficiaries of this trend. Saks doesn't have much of an international presence -- it has only four licensed stores outside the U.S., compared with 45 at home. But as Saks CEO Stephen Sadove tells me in the accompanying video, foreign shoppers are keeping the registers at Saks humming — and have the potential to do much more.
The flagship Saks store in midtown Manhattan sits just across the street from Rockefeller Center, a tourist mecca. In 2010, New York City welcomed — or didn't welcome, as the case may be — 48.8 million visitors, of which 9.7 million, or 20 percent, came from abroad. As a result, foreign tourists can account for up to 20 percent of sales at Saks' New York outlet. Beyond New York, foreign shoppers are a significant force in gateway cities like Miami and Los Angeles. "We have core Canadian and European customers that come into Saks. When we had the very weak dollar back in 2007 for example, you saw the empty suitcases coming into the store," said Sadove. "Today we have an influx of Russians and Brazilians, and the Chinese tourists are really starting to pick up." (Here's a two-year chart of Saks's stock)
In 2011, according to the Commerce Department, a record 62.3 million international visitors came to the U.S., up 5.6 percent from 2010. Most of those came from adjacent countries — with 21 million arriving from Canada and 13.4 million from Mexico. But 27.8 million came from overseas, up from 23.9 million in 2007. (More data can be seen here) Visits from Brazil rose 26 percent to 1.5 million, making it the sixth largest source of international tourism. Visits from China rose 36 percent in 2011 to 1.09 million, making it the ninth largest source of international tourism. (That's also up from just 157,000 in 2003)
Tourism was a $110 billion export industry for the U.S. And every time a shopper brings cash from overseas and spends it at a store in the U.S., that registers as an export as well. Virtual shoppers are also flooding into Saks from overseas — Saks.com ships to 90 countries around the world.
As impressive as the growth has been, there's room for much more. There are 6.6 billion people outside the U.S., and with each passing year more of them can afford to visit. American luxury brands like Coach and Ralph Lauren travel well. Luxury retailers are particularly excited about the potential for rising Chinese tourism. After all, China's "one percent" contains 13.4 million people. "They spend $5,000 to $6,000 on average," Sadove said. "They want the brands like Louis Vuitton and Chanel, and we offer those brands in the U.S."
Sadove notes that at luxury stores in Paris and London, Chinese tourists account for between 30 and 40 percent of total sales. But it is much harder for Chinese tourists to visit the U.S. than it is for them to visit Europe. After 9/11, the U.S. instituted tougher restrictions on tourist visas. People in China must travel to one of five consulates for an in-person interview in order to get a tourist visa. Chinese tourists face an average wait of 110 days for a U.S. visa, compared with ten days for a visa to France.
Sadove and other retailing executives have called for the U.S. to relax some of its restrictions and generally make the process more user-friendly. In January, President Obama issued an executive orderthat instructed the State Department and Department of Homeland Security to cut waiting times and increase tourism visa-processing capacity in Brazil and China. And earlier this week, the U.S. announced it would open two new consulates in Brazil to help attract more tourists.
In recent years, industrial companies like Boeing and farmers have been among America's great exporters. It's possible that America's bountiful malls could join the ranks.
Daniel Gross is economics editor at Yahoo! Finance
Follow him on Twitter @grossdm; email him at email@example.com
His next book, Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy, will be published in May by The Free Press.