Is Shopping Overseas a Good Deal or Waste of Money?

Shopping usually comes in among the top three or four activities travelers pursue when they’re traveling overseas. But prices in many areas and on cruise ships seem to be getting higher and merchants seem to target tourists for gouging. A reader recently put it this way about cruise ship shopping:

“You mention ‘nickel and diming.’ Consider $5.00 for Pringles at the ship’s Duty Free Store. The jewelry store has expanded with a lot more cheap jewelry but the prices are still up (I’m an amateur gemologist). They were really pushing black pearls both on the ship and in their recommended stores in several ports.”

Over many years, my experience has been that really good overseas shopping opportunities have been steadily declining. Still, you can find some good deals and you can find interesting stuff to buy. Whether or not you find good deals shopping overseas depends mainly on:

1. Tax levels and retail markups in your home area.
2. Tax levels where you shop.
3. The local labor content of what you buy.
4. How “captive” your environment is.
5. How well you know your merchandise
6. How useful your buy will really be.

{{{SmarterBuddy|align=left}}}High-Tax Where You Live

The main “sure fire” bargains overseas are alcohol and tobacco – products that are heavily taxed in the U.S. Because they’re also heavily taxed in many foreign jurisdictions, as well, they’re prime candidates for “duty free” shopping or shopping in places such as the U.S. Virgin Islands that keep taxes low to encourage tourist buying. The main constraints are the limit of one liter of tax-free alcohol you’re allowed to bring back to the U.S. and the requirement that you must pack it in checked baggage on any connecting flight within the U.S. Even if you bring more than one liter, however, federal duties are fairly low.

Regardless of where you are, many big ticket items you might consider buying come from the same places: cameras and electronics from Asia, single malt Scotch from Scotland, perfumes from France, and so on. So the local prices anywhere in the world depend on local retail markups and taxes. Compared with the rest of the developed world, the U.S. is a low-tariff, low-tax, and low-markup country. That means, typically, the only manufactured items you might consider are those on which the U.S. assesses high excise or other targeted taxes. Although I found some really good overseas deals on high-tech merchandise many years ago, I haven’t seen any such bargains over the last 10 years or so.

High Tax Where you Shop

Most European countries add a value-added tax (VAT) to most purchases. That makes “street” prices for just about anything higher than they typically are in the U.S. As we’ve noted before, you can get VAT refunds on some purchases, but you don’t recover the entire tax and you have to buy a minimum to qualify.

High local VAT is the main reason so many European airports feature such elaborate “duty free” or “tax free” shopping. Prices, however, can vary a lot from airport to airport. In most of Europe, airport merchants price their goods at just enough below local “street” prices to attract the locals. These prices are often still higher than U.S. street prices. Other airport stores, however, deliberately price at bargain levels, as a means of encouraging use of the airport. Tax-free deals on lots of merchandise are good deals for Europeans. Tax-free stores also feature perfumes, but I’ve found comparative pricing almost impossible to figure.

Unlike the big European countries, Asian “bargain” centers such as Bangkok and Hong Kong are fairly low-tax and low-markup shopping areas. Micro-country shopping havens such as Andorra also offer no-tax shopping for Europeans. Andorra la Vella’s main street is wall-to-wall electronics shops. In these areas you can find street prices that are on a par with what you pay in the U.S., and you may even find some bargains on models designed to be sold only locally.

Labor Content

You can find many bargains on handmade stuff of various sorts in most areas where local wage scales are low – most notably Asia. Hand-tailored suits and dresses, for example, cost a fraction of what you’d pay in New York or London. Whether you can accept the quality of what you get that way depends on your view. I’ve had great success with Bangkok and Hong Kong suits and shirts.

Original art work can also be a lot less expensive overseas. Just make sure to avoid the many “paint by the numbers” standard watercolors you see so many places.

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Captive Environment

Typically, any venue where your mobility is limited is an open invitation to gouging, and you don’t have to go overseas to find that. That’s a particular problem in self-contained resorts and on cruise ships, per our reader’s comment. In that connection, keep in mind that the merchants a cruise line or port lecturer recommends are good for the cruise line and port lecturer, not necessarily for you.

Know Your Merchandise

If you’re thinking of buying a big ticket item overseas, check the prices before you leave at Costco, Walmart, big online discounters, Macy’s, or wherever you might otherwise buy. Unless you know local prices at home, you can’t possibly make a sensible decision overseas. And when you’re looking at overseas prices, add in a little extra to cover the risks of dealing with a merchant many thousand miles away if something goes bad.

As a second warning, don’t ever buy anything overseas that you can’t accurately assess for quality. If you can’t tell gold from brass, don’t buy gold. If you can’t tell an emerald from a hunk of broken green glass, don’t buy emeralds. Sure, you can minimize the risk by buying from a big and well-known merchant, but even then, sorting out a problem can be almost impossible.

Watch out for knockoffs of fashion goods, watches, and other similar stuff pushed as “genuine.” The world marketplace is full of cheap copies of everything from Gucci to Rolex.

The “Six-Month” Rule

With any overseas purchase – from big ticket to trivial souvenir – I suggest a simple utility test: “If I buy this, where will it be in six months? Will I actually be using or enjoying it, or will it sit somewhere out of sight and out of mind?” Even a really good price isn’t a good deal if you don’t actually use the product. The last time I was in Russia – before digital cameras took over the market – I was sorely tempted by a local Hasselblad knockoff, at $200, less than 10 percent of the cost of the real thing. But when I asked myself the six-month question, I left the store. I knew that no matter how good the price or the camera, that mid-format camera would sit on a shelf while I continued to use my 35mm SLR.

Russia offers another example, at the other end of the scale. Just about anywhere you go, someone is hawking those “Matrioshka” nesting dolls. They’re very clever. But if you stop and consider the six-month rule, you’ll probably pass. As soon as you got home, it would probably go into that drawer where you put everything else you don’t know what to do with but never empty. Ditto those ubiquitous plastic Sphinx models you see in Egypt or even the Eiffel Tower models.

On the other hand, I wear my Bangkok and Hong Kong clothing all the time. My wife continues to use an unusual kitchen utensil we brought back from France. And our walls are decorated with quite a few true original paintings and ceramics we really liked when we traveled in both Asia and Europe.

Your Turn

How About it, Readers? Let me know of particularly good deals you’ve found overseas, scams you’ve encountered, or both. Also, which airports do you think have the best tax-free shops?