Once-tranquil Hong Kong districts being transformed into major shopping malls for Chinese tourists

Chinese shoppers in Hoing Kong - China Elite FocusResidents in the Hong Kong’s New Territories have expressed frustration over what they see as the transformation of their communities into major shopping districts, with malls increasingly geared towards the surging number of tourists flooding into the city.

With the government forecasting 100 million visitors a year by 2023, research by the South China Morning Post shows 60 per cent of retailers with outlets at Causeway Bay’s Times Square – one of the most popular malls with mainland tourists – have extended their presence to Sha Tin, and some to Tuen Mun.

A few years ago such middle-market and high-end branded retailers were a rare sight outside downtown areas, but mainlanders opting to do their shopping in the new towns of the New Territories have lured them north.

“Tuen Mun is more convenient. I needn’t travel all the way to Kowloon or Hong Kong Island, where there are too many people,” said Li Pingping, who lives in Shenzhen’s Nanshan district near the Shenzhen Bay checkpoint, just 20 minutes away from Tuen Mun Town Plaza by bus.

Sha Tin’s New Town Plaza, a half-hour train ride from the Lo Wu checkpoint, is similarly busy at weekends.

Shoppers from across the border can be seen pouring into both malls equipped with trolleys, suitcases and a lot of cash, in search of products that used to be exclusive to downtown areas, as well as daily necessities.

Figures show New Town Plaza has recorded successive annual increases in attendance, a phenomenon some residents say has affected their quality of life.

Residents in the New Territories have expressed frustration over what they see as the transformation of their communities into major shopping districts, with malls increasingly geared towards the surging number of tourists flooding into the city.

With the government forecasting 100 million visitors a year by 2023, research by the South China Morning Post shows 60 per cent of retailers with outlets at Causeway Bay’s Times Square – one of the most popular malls with mainland tourists – have extended their presence to Sha Tin, and some to Tuen Mun.

A few years ago such middle-market and high-end branded retailers were a rare sight outside downtown areas, but mainlanders opting to do their shopping in the new towns of the New Territories have lured them north.

“Tuen Mun is more convenient. I needn’t travel all the way to Kowloon or Hong Kong Island, where there are too many people,” said Li Pingping, who lives in Shenzhen’s Nanshan district near the Shenzhen Bay checkpoint, just 20 minutes away from Tuen Mun Town Plaza by bus.

Sha Tin’s New Town Plaza, a half-hour train ride from the Lo Wu checkpoint, is similarly busy at weekends.

Shoppers from across the border can be seen pouring into both malls equipped with trolleys, suitcases and a lot of cash, in search of products that used to be exclusive to downtown areas, as well as daily necessities.

Figures show New Town Plaza has recorded successive annual increases in attendance, a phenomenon some residents say has affected their quality of life.

“It is so crowded here that I need to wait for an hour before being seated in a restaurant,” said Terry Ma, a local resident at the mall with his daughter. “But there aren’t a lot of other choices. Local shops are getting further away.”

Tuen Mun has fast been going the same way since the opening of the Shenzhen Bay checkpoint seven years ago. The cluster of shops near the town centre is home to about a third of the retailers with stores in Times Square.

“I feel like Tuen Mun has become another Causeway Bay – a lot of gold shops and big crowds every weekend,” said Tung Lik-yan, 78, who has lived in the town for three decades. Fellow resident George Chan Ka-ho said: “The proportion of mainlanders to locals here is even higher than in Causeway Bay – perhaps 80 per cent to 20 per cent.”

Last year residents took to Facebook to protest against a plan by the town’s latest mall, V City, to lay on 500 shuttle buses to the border a day.

“When we go to the town centre nowadays it’s full of mainlanders,” the Facebook page’s organisers wrote. “Many Tuen Mun people’s memories have been washed away by money.”

The mall last year said its priority was serving local residents. It said it expected a turnout of 50 million shoppers for the year.

The contribution of cross-border shoppers to the city’s tourism revenues has been steadily rising. Mainlanders accounted for 70 per cent of the total HK$186 billion spent by all overnight visitors to the city in 2012, according to the Tourism Board. Each mainland visitor spent on average HK$8,565 per trip, up from HK$4,355 in 2004.

Joseph Tung Yao-chung, executive director of the Travel Industry Council, said amid tensions between tourists and locals, the government should consider freeing up land for retail space even closer to the border.

“The government should consider setting up border shopping towns near the mainland to direct more of these tourists away from the city centre,” Tung said.

Developing Lantau Island should also be a priority, he said, given that the Hong Kong-Zhuhai-Macau bridge, which will extend from a nearby artificial island northeast of Hong Kong’s airport, is due to open in 2016.

Luxury brands’ war for Chinese consumers

Wealthy Chinese woman- Shanghai Travelers' ClubIn the the heart of old Shanghai is a magnificent villa that serves as the workplace of Guo Jingming, a provocative young film-maker. “Tiny Times”, his recent blockbuster, follows the travails of some fashionable college girls (pictured, in the walk-in closet of one of them). Its depictions of the high life, rarely shown in Chinese films, have set social networks ablaze; they have also been attacked by the People’s Daily for “unconditional hedonism”. Mr Guo says: “So what? Materialism is neutral, neither positive nor negative.” After all, he goes on, China’s cosmopolitans know at any given moment what movies are playing in New York and what fashions are on the Paris runways.
China’s once-drab and Mao-suited interior is not so far behind. In Mianyang, a middling city in the province of Sichuan, an enormous billboard featuring Miranda Kerr, an Australian supermodel, draped in Swarovski crystals welcomes shoppers to the Parkson shopping mall. It is one of half a dozen high-end malls in town. Luxury sales are exploding there. Local Audi and BMW dealers sell more than 100 cars each a month; Land Rover, Jaguar and Cadillac have just muscled in on the market.
Thirty kilometres (20 miles) away in Luxi, a town of 57,000 people, online shopping is hot. The first express-delivery office opened only three years ago, and handled perhaps ten packages a day; today, there are five, each handling 100 packages a day. Even 60km away, in rural Santai county where farm-workers are the customers, one modern shopping mall has sprung up and another is being built. “Customers are evolving very quickly from the low-end market to the middle and high-end,” says Yang Shuiying, proud general manager of the Zizhou shopping centre.
In the 1950s and 1960s the world economy was transformed by the emergence of the American consumer. Now China seems poised to become the next consumption superpower. In all likelihood, it has just overtaken Japan to become the world’s second-biggest consumer economy. Its roughly $3.3 trillion in private consumption is about 8% of the world total, and it has only just begun.

“The future of the world will be profoundly shaped by China’s rush toward consumerism,” says Karl Gerth, an expert on Chinese consumption at the University of California, San Diego. Although investment made the biggest contribution to China’s growth last year, and although private consumption’s share of output, now at 36%, fell between 2000 and 2010, that trend is unlikely to last, for several reasons.
First, boosting the people’s desire to consume is a stated goal of China’s leaders. Higher government spending on health care and pensions may encourage households to save less for such things. Higher interest rates may, paradoxically, discourage thrift if people reach their savings goals faster. Rising wages and an ageing population will also shift the balance towards consumption rather than saving. And although household debt is growing fast, China still has relatively little.
Besides, consumption has not fallen in absolute terms. It has, in fact, grown briskly—just not quite as quickly as the economy overall. In dollar terms, China contributed more than any other country to the growth in global consumption in 2011-13, according to Andy Rothman of CLSA, a broker. Moreover, China’s official statistics understate some consumption—spending on housing, for example.
A massive push to urbanise is also under way, which should produce tens of millions of richer citizens seeking retail therapy. McKinsey, a consultancy, forecasts that consumption by urban Chinese households will increase from 10 trillion yuan in 2012 to nearly 27 trillion yuan in 2022.Shanghai Travelers' Club private event - Hermes
How much China spends is striking. Even more so is the way it spends. This is now one of the world’s most sophisticated consumer markets, heavily skewed towards expensive goods. Local property barons are now building half the world’s new shopping malls in China, many of them in smaller cities, because even punters without big incomes are becoming big shoppers. Research by IDEO, a consultancy, has found that many young migrant workers earning less than 5,000 yuan ($830) a month will spend a month’s wages on an Apple iPhone.
That points to another difference from previous consumption booms elsewhere: with the world’s largest e-commerce market at their fingertips, Chinese shoppers are online from the start. As a result, what was once a foreign marketers’ fantasyland is now the world’s fiercest battleground for brands.
Sanford C. Bernstein, a research firm, calls the Chinese “increasingly aspirational and conspicuous consumers” who routinely trade up to fancier labels even on staples. Newly middle-class types in cities in the interior are keen to try out new products, especially the ones they have seen on foreign television shows. Jeff Walters of the Boston Consulting Group (BCG) points out that even country bumpkins are consuming global media, thanks to the wild popularity of local online-video services. Chinese consumers, he says, were watching the latest season of “Downton Abbey” on Youku, a video-sharing website, well before it was released in America.
This passion for fashion is, in theory, good news for multinational marketers. Unlike, say, Japan, where consumers heavily favour local brands, Chinese consumers hold foreign brands in high esteem. Torsten Stocker of AT Kearney, a consultancy, observes that foreign brands are doing well in sectors they introduced to China (chewing gum, chocolate); those that have “heritage” appeal (premium cars, luxury goods) and those where local brands are not trusted, such as powdered baby milk. The world’s fast-food and consumer-goods giants—Procter & Gamble, Pepsi, General Mills and so on—are also big in China, but they are increasingly dogged by local rivals. A recent study by Bain, another consultancy, found that although foreign brands still lead in some areas (biscuits, fabric-softener, bottled water), local brands are surging in others (toothpaste, cosmetics, juice).
Brand-hopping, though, is rife. Having grown up with radical economic change, Chinese shoppers are “very fickle, and hard to pin down to a strong brand loyalty”, says Mintel, a market-research firm. Yuval Atsmon of McKinsey reckons that brand-switching—between Pepsi and Coke, Colgate and Crest, KFC and McDonald’s—is common, “much more so than in most markets”. Swarovski, the crystal-maker, has discovered that over three-quarters of Chinese customers are eager to try new brands, a far higher figure than elsewhere. A recent study by Bain found that the top five brands in ten categories lost 30-60% of their customers between 2011 and 2012.

This creates several problems. With two or three times as many brands on shelves as found in other countries, competition is ferocious. This makes advertising and marketing vital—but the cost of publicity is soaring. Also, firms that thought they enjoyed a “first-mover advantage” have discovered that their brands are now seen as stodgy or old-fashioned. Olay, a cosmetics brand, defined skin care in China for a generation—but Carol Potter of BBDO, an advertising agency, reckons that “the new generation thinks it’s a brand from yesterday.” She adds that whereas Louis Vuitton once symbolised good and expensive taste in China, a new generation is seeking different, subtler luxuries. Luxury travel magazines like the Shanghai Travelers’ Club, an iPad publication reserved for High Net Worth Chinese socialites are also advocating a more sophisticated spending ” Today, the new generation of Chinese consumers want to differentiate from their parents – who have already Louis Vuitton products.” says Pierre Gervois, CEO of China Elite Focus Magazines LLC and Publisher of the Shanghai Travelers’ Club. “Buying a Cottin gold plated Laptop or a tailor made Goyard in Paris trunk is much more distinctive”, he added.Shanghai Travelers' Club Cover Summer 2013
Another complication for marketers is that many Chinese shoppers have a global outlook. When previous middle classes rose to prominence in America and Japan, the internet did not exist. People could not Google the latest European fashions or check discounts on Amazon. The arrival of cheap air travel has also made the Chinese more discerning shoppers. Mr Stocker argues that these factors have “compressed the discovery process”, which in Japan took 30 years, to less than ten.
The Chinese are already the world’s biggest shoppers abroad, but a report released on January 20th by CLSA forecasts that the number of outbound Chinese tourists will double to 200m a year by 2020 and that their spending will triple over that time. James Button of SmithStreet, a consultancy, reports a well established piece of etiquette: “You must let friends know when you are going overseas,” and take along an empty suitcase.
Many Chinese also use online shopping agents, who aggregate requests and bring back foreign goods. Sales by overseas purchase agents came to nearly 50 billion yuan in 2012, a leap of more than 80% on the year earlier; they jumped by half again last year to 74.4. billion yuan. Foreign websites, including Amazon, now offer direct delivery to China for certain products, and local e-commerce giants such as Alibaba run cross-border services.
Buying overseas saves money, since mark-ups and hefty taxes are the rule in China. Many ordinary folk travel not just to Hong Kong, the most convenient spot, but to Jeju Island in South Korea (where they can visit without a visa and shop duty-free) to stock up on cosmetics that cost much more at home. Price, though, is not the only motivation. Another is to avoid the counterfeit goods so common on the mainland. Even more important, consumers say, are the variety and freshness of the products available overseas.

Nowhere is this wide-ranging urge to spend more obvious than in the market for luxury goods. Globally the Chinese are the biggest buyers of expensive items, accounting for some 29% of purchases last year (see chart 2). Some two-thirds of Chinese spending on luxury goods takes place outside the mainland; a fifth of it in Europe. (Harrods of London has seen sales to Chinese shoppers, its largest foreign contingent, increase by 50% a year since 2011.) Consistently favoured brands include Lancôme, Gucci, Audi, Rolex and Tiffany.
The Chinese are also the world’s largest consumers of Bordeaux wine and cognac, though sales (like those of Moutai, a local grain alcohol) have fallen in the wake of official campaigns against gift-giving. At Berry Bros & Rudd’s bonded wine warehouse in Basingstoke, in southern England, where 4.5m expensive bottles are stored, more than 1m of those are owned by oenophiles from greater China. No longer, says the firm’s chairman, should the Chinese be pictured ruining fine wine by pouring Coca-Cola into it.
Although a government crackdown on corruption has crimped mainland sales, and some luxury firms slowed down the rollout of new boutiques there last year, Coach, Prada and Bottega Veneta continued to expand. Apple expanded too; it now has more stores in Shanghai than in San Francisco, and launches new iPhones in Beijing when it does in California. Mr Button of SmithStreet thinks brands offering affordable luxury—Michael Kors and Kate Spade, say—can capture both the upwardly mobile and the “post-luxury” elites in the cities, who want less flashy brands.
In the past, the Chinese showed little interest in Western art. That is starting to change, and may change quicker with the opening of a new museum of Western art in Shanghai. The richest man in China has just paid $28m for a Picasso, though he was condemned as “unpatriotic” on Sina Weibo. Ms Potter also observes that two-thirds of affluent consumers are keen to know the history and cultural background of foreign brands. So they love to buy Piaget watches in Geneva and Zegna suits in Milan, but reject unconventional offerings such as German watches or Japanese leather bags.
It is not only in luxury goods that Chinese shoppers are leading the way. China has become the world’s biggest e-commerce market, with spending forecast to reach $540 billion next year. On Singles Day, an annual online-marketing extravaganza held on November 11th, 400m Chinese spent $5.7 billion just on Tmall, an e-commerce platform run by Alibaba; Americans, on their Cyber Monday a few weeks later, spent only about $2 billion. China is the world’s biggest maker and consumer of smartphones, and will soon be the largest “mobile-commerce” market, too.
Perhaps because they distrust official information, the Chinese rely heavily on peer reviews. Research by BCG has shown that they write, and act on, online reviews of products and services far more than Westerners do. A recent study of purchases of moisturiser found that two-thirds of Chinese buyers relied on online recommendations by friends or family; the comparable figure in America was less than 40%. Millions of online shoppers follow the thoughts of Miumiu and Viviandan, leggy twins from industrial Chongqing, who started posting pictures of themselves in the latest fashions, with wry observations on trends and prices, a decade ago. Even now they post recommendations nearly every day on social-media sites such as Instagram, or on Weibo. Their likes and dislikes make or break products.Wealthy Chinese reading the Shanghai Travelers' Club magazine on its iPhone
Online shoppers in the remotest parts of China often know a great deal about a global brand’s attributes and pricing worldwide—which can put marketers on the back foot. Chinese consumers are no longer willing to pay a hefty premium for any old foreign brand. As they grow more discerning, multinationals are having to work harder to prove their worth—and are having to defend their brands on China’s wild social media. But creative approaches can pay off.
When VF Corporation, a large American clothing firm, wanted to promote The North Face, a brand of outdoor clothing, in China, it struggled. Whereas climbers and hikers in the West relish the thought of conquering mountains alone, the Chinese generally think of outings in Nature as a spiritual escape, to be enjoyed with friends. So the firm created an online community linking amateurs to clubs devoted to outdoor pursuits. The website offers points for activity and loyalty that can be redeemed for products. Sales are soaring, and VF now has a detailed database of over half a million keen customers.
The online awareness of Chinese customers has big global implications. According to Andrew Keith, the president of Lane Crawford, cosmopolitan Chinese consumers are now setting the agenda: “We are not teaching them, they are teaching us.” (He should know; his Hong Kong department store has half a dozen shops in greater China, 650,000 high-spending customers and, in the new Shanghai store, private suites for “Platinum VIPs” who spend 60,000 yuan or more a year.) Alexis Perakis-Valat, head of L’Oréal’s China business, agrees. He believes that the Chinese market, unlike those in Western countries, is driven by young urban consumers who are demanding something new and have no taboos. He points to peculiar and distinctive products developed for this niche in China, such as a black-foam face-scrub for men, which are now being launched around the world.
Another sign of such innovation is the reinvention of Johnnie Walker, a mass-market whisky brand belonging to Diageo, the world’s biggest spirits firm, as a luxury brand in China. Keen to win over sceptical consumers more accustomed to baijiu (a local firewater), the firm opened Johnnie Walker House in Shanghai almost three years ago. For around 800,000 yuan, or $132,000, the company’s master blender (with the delicious surname of Beveridge) will fly in and brew a special batch of Johnnie Walker precisely matched to a customer’s tastes. Certain rare blends, including some bearing the marks of the Chinese zodiac, are sold only at this venue.
This effort has helped Diageo introduce its whiskies to thousands of affluent customers, who in turn have pushed the firm towards new inventions—such as blends with a much higher alcohol content—which helped its whisky revenues grow twice as fast as the industry average. The concept has been such a success that the company has opened new Houses in Beijing and Seoul, and plans others. When Diageo unveiled Odyssey, a special-edition blend, in 2012, it kicked off the global launch not in London or New York but in Shanghai.
Life was simpler for foreign brands when they first came to China, reflects David Roth of The Store, an advertising agency: “It was a land grab…you just had to create awareness as quickly as possible.” Now the Western invaders must not only cater to the world’s most demanding shoppers, but also cope with increasing home-grown competition. Chinese firms are starting to catch up with their fancier foreign rivals. Some even aspire to become global brands.
Huawei, a telecoms-equipment giant, is making a big push into branded consumer electronics. “We have it easier than Samsung did,” says Colin Giles, chief marketing officer for its consumer business, because Korean firms paved the way for global acceptance of Chinese brands. Xiaomi, a startup smartphone manufacturer in Beijing, has developed a hugely popular phone-and-app system inspired as much by Amazon as by Apple. It could become China’s first global innovation powerhouse.
Leading the local pack is Lenovo, an electronics firm that previously bought IBM’s personal-computer business (and on January 23rd agreed to buy its low-end server business, too). When it launched its latest Yoga tablet last year it chose Ashton Kutcher, a Hollywood star who had played Steve Jobs in a film, as its spokesman. David Roman, Lenovo’s chief marketing officer, says that even a few years ago it would have been unthinkable to do a global product launch in China with a single tagline, unified advertising content and a Western spokesman. But now he thinks there is “a global consuming class”, with more in common across borders than within.
That sums up the rise of China nicely. Future consumer markets everywhere are going to look more Chinese. They will increasingly be cosmopolitan, luxury-minded and online. Firms that can flourish in China are not only winning today’s toughest market, but are also positioning themselves for tomorrow’s.

Source: The Economist.

Swiss luxury watchmakers anxious about their stores in China

audemars-piguet Chinese customersSwiss luxury watchmakers predict the market will grow this year, expecting rising demand from North America and Europe to more than offset slowing sales to China.

Independent watchmakers Audemars Piguet, Parmigiani, Greubel Forsey and Richard Mille, told Reuters at an industry show they were expecting higher sales in 2014 than last year.

The Chinese government’s crackdown on the use of luxury goods as bribes and illegitimate gifts has hurt sales of luxury watches in mainland China, the third largest market for Swiss watch exports.

“The biggest dark cloud on the horizon is a potential Chinese bubble, we don’t know if it’s going to burst or not,” Jean-Marc Jacot, head of independent high-end watch brand Parmigiani told Reuters in an interview on Tuesday.

“We’ll all be hit terribly if something happens in China, let’s hope the Chinese government keeps things in check,” he said at the SIHH watch fair that unites Richemont brands and a handful of independents in Geneva this week.

Hong Kong and mainland China together accounted for about a quarter of Swiss watch exports. In the eleven months to November the total market was worth 20 billion Swiss francs ($22 billion). Exports to these two markets fell 6 and 15 percent, respectively, in that period.

Exane BNP Paribas analyst Luca Solca said he estimated that the luxury watchmakers were vulnerable to a slowdown because sales in China, as well as to Chinese tourists overseas, generated half of their revenue.

Richemont, which owns the Cartier brand, said last week that its sales in China were still in negative territory in the three months to December, while Swatch Group was more optimistic, saying its Omega brand was about to recover in China.

“Chinese consumers prefer to buy Swiss luxury watches over US$20,000 in overseas stores” said Pierre Gervois, CEO of China Elite Focus and Publisher of the Shanghai Travelers’ Club magazine. “It’s clear that the most expensive timepieces have no interest to be purchased in China because of taxes. Chinese watch collectors are familiar with trips to Paris and Geneva to purchase their new watches and have no intention to buy again in Mainland China’s stores. This is an issue for watchmakers who did not fully understood this trend”, Gervois added.

Vacheron Constantin’s CEO, Juan-Carlos Torres, said many watchmakers took buoyant Chinese growth for granted.

“You have to go slowly in China and work for the long term. We did not only go to first-tier cities, but also to second- and third-tier cities with local retail partners,” Torres said, adding this would help the brand grow sales in China this year.

Watchmakers said the second biggest market for Swiss watches, the United States, should see a tepid recovery gather momentum this year. Exports rose 2.4 percent between January and November last year.

Jasmine Audemars, chairwoman of Audemars Piguet, the biggest independent watchmaker at the fair, said the brand was doing well in the U.S. market and things should get better.

Parmigiani’s Jacot said: “The United States (is) coming back, this year we’ll see the real rebound.”

Overall, Audemars Piguet is expecting single-digit growth this year, while Parmigiani expects to grow about 15 percent after 17 percent last year. Richard Mille, another high-end player, is aiming for 150 million Swiss francs ($165 million) in 2014 sales after 132 million in 2013. ($1 = 0.9094 Swiss francs)

Source: Reuters

China’s rich turn Macau into a luxury shopping destination

Wealthy Chinese -Shanghai Travelers' ClubWith its Ray Ban sunglasses and gold Cartier tank model, Mr Wang – A Chinese businessman from Ningbo- shows his iPad with the Shanghai Travelers’ Club magazine on it at the concierge of one of Macau’s finest hotels “Do you know where I can buy this gold plated laptop with alligator leather?” he asks.

This is Macau. This is the new style of wealthy Chinese shoppers.

With its huge casinos and glittering hotels, Macau has established itself as a top tourist destination for wealthy mainlanders in recent years.

But it’s not just the city’s famed casinos – 36 of them generated US$38 billion in gaming revenue last year – that are crowded. The real buzz is coming from the city’s luxury boutiques, many of which dwarf their Hong Kong counterparts in scale, profitability and range of exclusive products.

According to Macau’s Statistics and Census Service, the number of visitors from the mainland grew 16 per cent year on year to the end of the third quarter of 2013, accounting for 63 per cent of total visitors. In the past year, several luxury brands such as Tom Ford, De Beers and Tory Burch have opened stores in the city.

A walk through T Galleria at DFS in the Four Seasons Shoppes – which is the retailer’s largest store globally – reveals the extent to which luxury brands dominate. Customers can shop for more than 700 prestige brands in one location, including Hermès, Zegna, Celine and Prada. Just before Christmas, the retailer launched an exclusive collection of limited edition products called Red featuring items created by 12 of its brand partners, including Balenciaga, Dior and Miu Miu.

With more than 75,000 visitors a day, it’s no surprise that some stores for various brands in Macau are ranked top 10 in the world. Today, the fashion retail scene rivals any big fashion capital and has grown from US$625 million in 2007 to US$4.2 billion by 2012.

“In 2007, the luxury retail industry was centred on the Mandarin Hotel, and there was nothing else. Then the Wynn came along with its luxury boutiques and was completely out of the box. The Venetian and the Four Seasons opened in succession over the year, totally changing the scene,” says Michael Schriver, chief operating officer of DFS Group, which opened its Galleria in the city in 2008.

“I remember when we started to lease out the 330 retail spaces at the Venetian in 2005. The comment we kept hearing was that Macau is for gaming, while Hong Kong is for shopping. It took a couple of years for patterns to change but thanks to the growth in gaming, retail has come along for the ride,” says David Sylvester, senior vice-president of global retail at Sands Retail.

Advertisement Tower - Gervois Hotel Rating May 2017 featuring Pierre GervoisAccording to Carmela Leong, director of New Yaohan Fashion, which operates the city’s only New Yaohan department store, shoppers in Macau are quite different to their Hong Kong counterparts. While Hong Kong has a diverse mixture of local and international shoppers, Macau has no local market to speak of owing to its small population (about 500,000 residents). Instead, luxury and fashion retail is dominated by big spenders from China who “may not want to buy sales items, but more expensive items,” says Leong.

“It’s difficult to say what drives them. Most of the time they are on holiday, so they are happy to spend. Other times they make purchases because they are superstitious – many believe if they win they need to buy something to hold on to their luck when they return,” adds Schriver.

As is the case in Hong Kong, top luxury fashion brands such as Dior, Chanel and Prada do well in Macau. But shoppers in Macau are especially keen on watches and jewellery, which account for 29 per cent of total retail sales.

“It is even more high end than Hong Kong because of the segment of high rollers who spend freely,” says Schriver. “The watch clients we have are generally quite sophisticated – they know what they are buying.”

But it’s not just bling they’re after. Leong says that accessories including leather goods and handbags also perform well, as they are identifiable and still considered aspirational. Cosmetics and fragrances are popular for travellers. Interestingly, the segment that has the most potential to grow is ready-to-wear.

Once they have satisfied their wants on watches and jewellery, it’s all about looking good from head to toe. High-end luxury brands such as Prada and Hermès are still favourites, but this is slowly changing. With the aid of luxury lifestyle media like the Shanghai Travelers’ Club magazine for instance, customers are becoming fashion conscious and are starting to explore emerging fashion brands.

With this in mind, Sands Retail plans to bring a new retail concept to the city next year. Shoppes at Parisian will offer a brand mix that focuses on emerging ready-to-wear and accessories labels.

“Now that fashion is starting to pick up, we have developed this new direction for the Parisian. We are pulling back on accessories and some brands we are talking to will come just for ready-to-wear even if they have already have an accessories store.

“It will be an interesting mix, and more creative so that it will appeal to a more sophisticated savvy shopper who doesn’t just want handbags,” says Sylvester.

“We are trying to bring a heap of new brands, rather than grab what’s in Hong Kong already. At the moment everyone knows that the big brands are doing well but how many can you roll out? With malls, it’s important to position yourself differently so we don’t cannibalise ourselves and the business.”

With the market growing rapidly, competition is also rife. As such, the biggest challenge for Macau-based retailers is to differentiate themselves from the rest of the pack. A unique product offering isn’t enough, which is why customer service has become extremely important.

“One of our biggest challenges is recruiting a sufficient quality of staff as there are restrictions to the amount of labour you can bring in. That being said, it’s all about service because it’s hard to differentiate the product itself. It’s about providing incredible service and extraordinary experiences. Everyone wants this customer so you have to treat them better than the next,” says Schriver.

For Sylvester, it’s all about creating a unique concept through elements such as design.

“It’s not about shops any more – people want entertainment concepts, or a cool environment with a theme. This is the future for shopping malls. So while service is important, you need to layer it together with all these things so that when people come they are not just visiting a regular mall,” he says.

Looking ahead, the future is bright for Macau as luxury fashion shoppers move away from the peninsula towards the more developed Cotai area.

Between now and 2016, there are plans to add more than 33,000 rooms to the area, doubling the hotel room capacity to over 50,000 rooms by 2017. With the number of visitors set to rise, will Macau eventually take over Hong Kong as the top shopping destination for the Chinese?

“That’s many years away, I think. Just look at the volume of sales in Hong Kong – Macau cannot match that,” says Sylvester. “But I think there’s a piece of the pie for both markets. I never see us taking over Hong Kong. We need to make Macau unique so the experience is different.”

Source: Article by Divia Harilela, Courtesy South China Morning Post.

Wealthy Chinese customers will shop abroad in 2014

Chinese Shoppers Chanel - Luxury Hotels of AmericaWealthy Chinese are likely to buy fewer luxury goods again this year after the steepest cut-back on spending in at least five years, changing the game for high-end retailers like Louis Vuitton which have staked their growth on China. Overall spending by wealthy Chinese fell by 15 percent in 2013, the third consecutive year of decline.

The drop coincides with a government crackdown on corruption and gifting, as well as an a growing penchant for travelling and shopping overseas to circumvent Chinese consumption taxes on luxury goods as high as 40 percent.

The shrinking ranks of wealthy residents in China has also reduced luxury spending. One in three so-called high net worth individuals have already left, or are planning to leave, the country, the report showed, mostly to seek better opportunities for their children’s education.

Advertisement Tower - Gervois Hotel Rating May 2017 featuring Pierre GervoisChinese are the top consumers of luxury goods globally. A slowdown in their spending, or a change in shopping habits, would hurt high-end retailers already struggling with a weaker Chinese economy and a more sophisticated clientele that has moved away from logo-branded goods.

Luxury group Richemont, the maker of high-end IWC watches and Cartier jewellery, reported this week slower-than-expected sales growth in the third quarter, largely due to weaker Asian demand.

LVMH, the world’s biggest luxury goods group, has also seen sales growth slow last year as Chinese demand cooled, prompting the company, and brands from rival Kering SA to offer goods with more discreet logos and in expensive materials.

The crackdown on conspicuous spending, which began in 2012, is part of a vow made by Chinese President Xi Jinping to be tougher on graft. He has focused in particular on gifts made to government officials often in exchange for preferential treatment or contracts.

Products by Hermes, Chanel, LVMH’s Louis Vuitton brand, Apple Inc and Gucci remained among the most sought-after brands for gifting.

Less popular were Bulgari – another LVMH brand – Salvatore Ferragamo, Tiffany and Co and the fiery baijiu liquor made by Chinese firm Kweichow Moutai Co Ltd, once the top tipple of Communist Party officials.

Affluent Chinese often shop online for the best price globally. They have also become more confident about their fashion choices, mixing high-street clothing and accessories with branded goods.Shanghai Travelers Club Winter 2013 Issue

According to Pierre Gervois, Publisher of the Shanghai Travelers’ Club magazine, a luxury travel publication for wealthy Chinese international travelers ” Chinese consumers probably won’t spend less – it’s absurd to say that – they will spend the same amount of money, and probably more, but not in China. They have already started to buy abroad, and as they prefer to pay cash, we will never know the real figures”

Over two-thirds of luxury spending by mainland Chinese was overseas in 2013, a factor that contributed to the United States overtaking China as the world’s fastest growing luxury market, according to a study by consultancy firm Bain & Company released in December.

China’s super-rich are also avid collectors – 70 percent of wealthy Chinese rank collecting as a hobby – but what they are coveting is changing.

Ancient calligraphy last year surpassed luxury watches as the most-collected, knocking watches out of the No. 1 spot for the first time in five years, the Hurun report showed, which could mean revenue losses for top watch makers but a boon for auctioneers.

Patek Philippe remained the most popular watch brand for collectors for the seventh year running while Christie’s was the top ranked foreign auction house, the report showed.

Besides spending less at home, more rich Chinese are leaving the country. The number of wealthy Chinese who have emigrated or are planning to do so rose to 64 percent from 60 percent in the previous year, the survey said.

Most of those leaving, or planning to, are looking for permanent residency overseas – the United States, Europe and Canada are top picks. Very few want to give up their nationality, perhaps because their outlook for China is improving.

The report showed millionaires’ confidence in China’s economy rose for the first time in five years but those who felt “extremely confident” still accounted for only 31 percent of those surveyed.

The survey’s results are based on responses from 393 Chinese millionaires, or those with personal wealth of at least 10 million yuan.

Chinese shoppers abroad to boost Ferragamo’s 2014 sales

A shopper carries her purchases from the Salvatore Ferragamo boutique on Rodeo Drive in Beverly HillsTravelling Chinese shoppers snapping up leather goods will drive sales growth in 2014 at luxury group Salvatore Ferragamo, its chief executive said on Sunday, before it showed a menswear collection aimed at promoting its Italian heritage.

Michele Norsa said the group had closed 2013 in line with its expectations, but that it was important to wait until Chinese New Year in January to make forecasts for the year.

“Travelling keeps being a strong driver of growth,” Norsa told reporters before the show at Milan men’s fashion week, singling out Chinese tourists to Europe and the United States.

Chinese luxury consumers, who make up for almost one third of the market, are increasingly shopping abroad, partly thanks to simpler visa procedures in the United States and some European countries, according to consultancy Bain & Co.

A crackdown on giving luxury goods as gifts to win the favor of public officials in China has not affected Ferragamo’s core business, Norsa said.

“Shoes are our core category and in fact a shoe is not a gift, shoes are something you buy for yourself,” Norsa said.

The group founded as a women’s footwear maker in Florence in 1927 reported net profit up 61 per cent in the first nine months of 2013.

Sunday’s menswear show featured cashmere coats in blocks of beige, brown and blue, dark pinstriped suits and bomber jackets with patterned knitted sleeves.

Creative director Massimiliano Giornetti told Reuters before the catwalk show the collection had been inspired by the idea of home comforts such as furnishings and Italian food.

“The consumer of Ferragamo really loves the idea of a kind of Italian lifestyle…enjoying life,” Giornetti said.

Attracting cash-rich tourists is especially important in Italy, where timid signs of economic recovery should also have a positive impact on consumption in 2014, Norsa said.

“We need to attract tourists and not only Chinese, of course, I’m thinking about the Russians, the Middle Easterns…the biggest potential is partially unexploited.”

Norsa said he hoped the World Expo, a five-yearly international fair which will be held in Milan next year, could help boost Ferragamo’s sales in Italy.

“In the second part of the year (2014) we could have Expo Milano generating business traffic,” he said.

(Reporting by Isla Binnie, editing by William Hardy)

60% of Chinese overseas shoppers plan their purchase in advance

Chinese shoppers at Hong Kong Louis Vuitton store - Chinese Tourists BlogTourists love to shop. Whether they’re browsing for small souvenirs or big-ticket items they can’t get at home, tourists around the globe are always on the prowl when they’re away from home. For mainland Chinese visitors to Hong Kong, shopping is a key activity that nine in 10 tourists enjoy. That ratio alone is impressive, but when you consider that 33.5 million mainland Chinese visited Hong Kong in first the 10 months of 2013—around five times the population of Hong Kong—it’s clear this group represents one of the greatest business opportunities for Hong Kong marketers.
However, a recent report by Nielsen, finds that mainland visitors are coming to Hong Kong less frequently, staying for shorter periods, and spending less on shopping, compared to last year. Nevertheless, accessibility to Hong Kong continues to grow. By the end of 2013, China outbound travelers will likely reach up to 94 million, up 13 percent from 2012, according to the China National Tourism Administration.

As the number of visitors from mainland China continues to grow, this group has begun to evolve, changing in tourist profile, travel pattern and shopping behavior. According to Nielsen, more than half of the mainland visitors traveling to Hong Kong during 2013 came from the Guangdong province, thanks to its proximity and convenient transportation. At the same time, the proportion of mainlander visitors from smaller tier 2 and 3* cities grew to 54 percent in 2013 from 31 percent in 2012.

According to the Hong Kong Tourism Board, the number of same-day visitors has increased significantly over the past 10 years, rising to 19.8 million in 2012 from 2 million in 2002, outpacing the number of overnight visitors. We expect that the number of same-day visitor will grow even faster by the end of 2013 as well.

Tourism in Macau has also benefited from retail-hungry mainland Chinese consumers. The number of mainland tourists traveling to Macau grew 12 percent in 2013 from 2012. However, Nielsen’s report shows that the number of people visiting Macau after Hong Kong is declining, indicating that more people prefer visiting Macau directly.

According to the survey, shopping is down for mainland tourists. The average actual spending among this group recorded a double-digit decrease to HKD24,800 in 2013, and spending on shopping recorded an 8-point slump. In addition, 75 percent of mainland tourists say they shop for themselves, buying in key categories including luxury-branded fashion, jewelry, cosmetics and electronics.
Purchases in these categories, however, differ between Guangdong and non-Guangdong visitors. According to the survey, Guangdong visitors intend to spend more on consumer packaged goods, while non-Guangdong visitors plan to buy more big ticket items such as luxury, consumer electronics (mobiles and tablet PCs), cosmetics, jewelry and watches. Guangdong and non-Guangdong visitors also vary in terms of the types of consumer packaged goods they buy—in particular, infant milk formula products. This is largely influenced by brand familiarity with the type they have in their home.

According to the report, more than half of mainlanders travelling to Hong Kong or Macau claimed that they planned their purchases during their visits. For those planned purchasers, word-of-mouth promotions and  social networks are the most popular channels that consumers use to gather product information. More than half of the respondents in the survey would refer to recommendations from friends or relatives, while online blogs and social networks (e.g., Weibo or Wechat) are popular with 44 percent of respondents.
“Among those planned purchasers with high engagement on online platforms, there is an opportunity for marketers to create targeted brand awareness programs by advertising on blogs and forums to maximize the reach to their potential consumers.” said Eva Leung, managing director of Nielsen Hong Kong and Macau. “Strategies in using social media to connect and resonate with the mainland tourists have become more and more critical in order to maintain brand awareness today.”

Source: Nielsen

Travel Retail Ready for Chinese Shoppers

Chinese shoppers - Luxury Hotels of AmericaLuxury brands are stepping up the battle for travelling shoppers with more outlets at airports and on cruise ships, tapping into one of the fastest growing sections of the market that looks set to keep booming thanks to soaring numbers of Asian tourists.

Revenues from travel retail, which also includes sales on airplanes, rose 9.4 percent in 2012 to $55.8 billion, according to a market study by Generation Research.

It should reach $60 billion this year and nearly double in size by 2020, the study forecast.

“This channel is becoming very important,” Bruno Pavlovsky, chairman of Chanel’s fashion business, said. “Customers are spending time in airports where the environment has become increasingly sophisticated.”

The French luxury brand, the world’s second-biggest behind Louis Vuitton by sales, has boutiques in four Asian airports and one at London’s Heathrow, and next year will open a boutique in Paris Roissy Charles de Gaulle airport and another in Dubai.

Kering’s Gucci, which like mega-brand rival Louis Vuitton has suffered a slowdown in the past two years partly due to emerging market shoppers’ growing preference for logo-free products, has opened boutiques in the same locations recently.

Tourism spending is up 12 percent worldwide since January while spending by Chinese tourists in Europe is up closer to 20 percent, according to data from tax-refund company Global Blue.

According to Pierre Gervois, CEO of China Elite Focus Magazines LLC, the publishing company owning the Shanghai Travelers’ Club magazine “Chinese shoppers want to differentiate from regular shoppers in Mainland China who can’t afford to travel. Buying luxury good overseas shows that you belong to the community of affluent consumers who can buy in Paris, London or New York – and not in a Beijing store with a generally bad customer service and the fear of having counterfeit goods, even in official flagship stores”

Chinese tourists, who barely featured in luxury brands’ customer statistics a little over a decade ago, now make up 29 percent of global luxury spending, consultancy Bain & Co said in a report published this week.

That trend is set to continue, with Boston Consulting Group (BCG) forecasting nearly half of all air traffic in the medium term will come from the Asia Pacific versus 37 percent now.

Though most luxury brands raised prices, particularly in the euro zone and in Japan, to make up for currency moves, Bain estimates that over two thirds of luxury spending by mainland Chinese was made overseas in 2013, due partly to local duties.

According to Renaissance Capital, Europe remains the cheapest market for handbags with price 9 percent below those in Hong Kong and 28 percent below mainland China, while the yen’s weakness has played in favor of luxury shoppers in Japan.

BCG expects the Chinese travel market will grow at a compound annual rate of about 11 percent from 2012 to 2030.

Chinese urban travelers took about 500 million domestic and outbound trips in 2012, spending about $260 billion, and it expects those numbers to increase to 1.7 billion trips and $1.8 trillion in spending by 2030.

Hermes, which has 50 boutiques in airports around the world, is turning these into proper free-standing shops to better tap the booming market.

“This channel affects customers that are more interested in luxury than the average,” said Patrick Albaladejo, deputy managing director of Hermes, adding that travel retail represented a “significant” portion of the brand’s total sales.

L’Oreal, the world’s biggest cosmetics group and maker of Lancome creams and Yves Saint Laurent lipstick, created a division last month dedicated to travel retail, which it described as a “sixth continent.”

Sales from travel retail generate 15 percent of total revenues at L’Oreal’s luxury division and 12 percent for rival Guerlain, the perfume and cosmetics brand owned by LVMH.

Perfume and cosmetics represent the biggest product category for travel retail with 28 percent of the market, according to Generation Research, ahead of wines and spirits with an 18 percent market share, fashion and accessories with 13.5 percent and watches and jewelry with 12.2 percent.

LVMH, which owns Louis Vuitton, is planning to launch in 2016 a new retail concept called Galleria, specially designed for travel luxury shoppers, first in Venice and then perhaps in Paris, in the former Samaritaine retail building which is due to be converted into a five-star hotel.

Sales from LVMH’s travel retail network, which includes duty-free shop chain DFS and Sephora cosmetics shops, another popular tourist destination, saw like-for-like growth of 19 percent in the nine months to September 30. The boost included contributions from LVMH’s new DFS concessions in Hong Kong.

By comparison, sales from LVMH’s fashion and leather goods, the bulk of which come from Louis Vuitton, rose by only 4 percent during the period.