After years of chasing the mythical wealthy Chinese consumers, Western luxury retailers start to leave China

dunhill store asiaFamous luxury brands have dreamed on the Chinese market for the last twenty years. Ignoring common sense (China remains, per capita, one of the poorest country in the World), they decided to open massively luxury retail stores chasing the mythical wealthy Chinese consumer.

It’s time for a reality check.

China has recorded the most number of closures of luxury stores between July 2016 and July 2017, the latest report by the investment research and management company Bernstein shows. The report, titled “Store Wars,” based its findings on Bernstein’s tracking of about 7,000 stores referring to 36 luxury brands including big names such as Burberry, Saint Laurent, and Céline. Burberry and Dunhill had the most store closures in China of all the brands during that period.
China has seen 62 net closures of luxury brand stores during the surveyed period, the largest number observed by Bernstein among all significant geographies. The firm viewed the trend as a revision of the over-expansion, in previous years, of luxury brands into the Chinese market.

The rapid development of the country’s luxury industry fueled by affluent Chinese consumers has given luxury brands unrealistic projections of retail sales in the past. This over-estimation, according to Bernstein, has led them to aggressively open retail stores in China that exceeds consumers’ real purchasing power. The same situation occurs in the Middle East region, another area where luxury consumption is rising fast.
Globally, the number of the net store openings by luxury brands has also for the first time run into the negative territory. The report said most brands have more or less closed some of their stores in the department stores, a traditional channel that accounts for about one-third of these brands’ global sales.

Chinese consumers have demonstrated some remarkedly different purchasing behaviours from that of the West. According to Pierre Gervois, a leading expert about wealthy Chinese travelers’ shopping behavior, and founder of the prestigious STC magazine “Western luxury brands have been warned since 2010 that their projections about affluent Chinese consumers were grossly exaggerated.” “Brands refused to acknowledge that their future Chinese customers would buy in overseas stores  rather than in domestic stores, both for tax reasons but also because of the poor customer service in their Chinese stores”, Gervois added.

The really affluent Chinese consumers (as affluent as an average U.S. or Western Europe consumer) massively choose not to purchase in Chinese stores, neither online in China.  They choose deliberately to purchase overseas, as a sign of social status.

Another distinguishing habit that sets Chinese luxury consumers apart from Westerners is their huge interest in buying luxury items online. Over the past year, an increasing number of luxury brands have embraced the e-commerce marketplace and launched stores with the country’s top two players, Alibaba and JD. Moreover, big names like Louis Vuitton and Gucci even opened their own Chinese e-commerce stores to ensure their offerings meet the expectations of Chinese consumers. And then there’s the nature of luxury itself, the meaning of which is different to younger consumers from what it was to their forebears.

Another concern that Western brands cannot officially recognize in China, is that a growing part of affluent millennials Chinese are moving from government-censored social media (WeChat, Weibo…) to Facebook and Twitter throughout an increasing use of VPN’s. That makes much less relevant their communications campaigns on Chinese networks.

Source:  Chinese Tourists Blog / JingDaily Blog / Bain / Bernstein


The Japanese have created a new word to describe Chinese tourists’ shopping sprees

Chinese shoppers - China Elite FocusChina’s voracious consumers have helped to create a new buzzword in Japan, with the term “bakugai” – which translates as “explosive buying” – selected as one of top additions to the Japanese language this year.

Fifty candidates were short-listed by publishing company Jiyu Kokumin Sha for the most popular word of 2015, ranging from new terms from pop culture, anime, politics and sport.

That list was whittled down to two winners, “bakugai” and the new baseball term “triple three,” to describe a .300 batting average with 30 stolen bases and 30 home runs achieved by two players this season.

The baseball phrase will have passed many Japanese by, but the influx of Chinese tourists are unmissable. And their spending sprees are fast becoming legendary among Japanese retailers.

Advertisement Banner Gervois Hotel Rating - May 2017 featuring Pierre GervoisDuring the Golden Week holidays in early October, around 400,000 tourists from mainland China descended on Japanese destinations, spending an estimated ¥100 billion (HK$6.3 billion) in the space of seven days.

Encouraged by the weaker yen and easier visa requirements, Chinese tourists accounted for fully 27.5 per cent of the total consumption by overseas visitors in 2014, according to the Japanese government’s white paper on tourism. And that percentage is likely to increase when the figures for 2015 are released.

And once they are here, they have a clear of idea what they want to spend their yen on.

According to the Shanghai Travelers’ Club magazine, the favorite digital publication of China’s Elite, the most affluent of Chinese travelers plan to spend between US$55,000 and US$340,000 per year in shopping overseas.

A study by the Japan National Tourist Agency indicated that 63 per cent of Chinese visitors purchased cosmetics and perfume, 55 per cent snapped up food, spirits and cigarettes and 52 per cent bought over-the-counter medicines and toiletries.

Perhaps surprisingly, only 37 per cent of Chinese bought electrical appliances – rice cookers and Japan’s famous high-tech toilet seats remain favourites – although they did buy in bulk. On average, a foreign tourist will spend ¥65,000 (HK$4,093) on appliances, but the Chinese splash out an average of ¥88,000 (HK$5,541).

Chinese tourists’ reputation for “explosive” bouts of buying have been played up in Japan’s tabloid press, which have played up reports of stores having their shelves stripped bare and tourists coming to blows over the last remaining items.

In one incident reported, two families became embroiled in a fight in a Kobe department store in August over the last box of disposable nappies.

Japan has become the most popular destination for Chinese tourists this year, with 2.75 million Chinese arriving in the January-to-July period, up from 1.29 million in the same period in the previous year.

Even the devaluation of the yuan in the late summer failed to appreciably slow down arrivals.

To meet growing demand and take advantage of an agreement reached in May between Beijing and Tokyo to permit additional flights, All Nippon Airways is ramping up its services to China and launched a new route from Tokyo’s Haneda airport to Guangzhou on October 25. At the same time, it doubled its present single daily flights from Haneda to both Beijing and Shanghai.

Similarly, the Laox chain of electronics and duty-free stores opened a new store in Tokyo in June specifically catering to visitors from China and further afield.

The new ¥2 billion (HK$131 million) store, in the Shinjuku district, stocks around 50,000 items, including home appliances, watches, cosmetics and household goods, all spread out over 2,100 square metres of floor space.

Source: South China Morning Post. All rights reserved.

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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.

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.

Korean retailers welcome Chinese shoppers

chinese-tourists-in-korea-china-elite-focusAbout 150,000 Chinese tourists are expected to visit Korea during the seven-day Chinese National Holiday from Oct. 1-7,  a 60 percent increase on the year before.

For the past two years, Chinese tourists have been driving Korea’s tourism boom, making up more than a third of foreign visitors.

Various retailers, including department stores, are offering services specially tailored to cash in on the boom in Chinese visitors.

Lotte Department Store is running a “Find the Chinese shopping magnate” promotion, which offers golden pigs, each worth 5 million won, and round-trip tickets to customers who make a certain number of purchases. The store has also doubled the number of employees who speak Chinese, Asia Business Daily reports.

Shinsaegae Department Store is opening K-Pop pop-up stores to showcase famous Korean stars’ products, DVDs, and posters. Hyundai Department Store is launching “K Sales” to attract Chinese tourists, offering 10-20 percent discount to costumers with foreign passports.

Cosmetic brands in Myeongdong district are also offering customized services. For instance, Nature Republic is running advertisements in Chinese for its “The Prime Line” products, which are particularly popular with the Chinese.

An increasing number of Chinese visitors are travelling independently rather than in tour groups.

These independent tourists have a relatively high disposable income and spend more time shopping for luxury brands in Gangnam and Cheongdam districts rather than visiting tourist attractions.

As a result, more and more Korean retailers are increasing services and products aimed at visitors from China.

China Travel Retail’s event in Shanghai from the 24th – 25th July 2012

China Travel Retail (CTR), the most focused networking event for travel retail brands, concessionaires and retailers targeting Chinese travellers, unveils the lists of world-class speakers and companies that will be involved in its inaugural event taking place in Shanghai on 24th and 25th July, 2012.

Joining the Moodie Report Founder & Chairman Martin Moodie, who together with Deputy Publisher Dermot Davitt will moderate proceedings, will be a host of world renowned industry speakers and panelists.

“We are delighted to have so many well respected industry speakers and companies participating at CTR”, said Jeffrey O’Rourke, Chief Executive of Ink. “This world-class line up of speakers, the superb agenda and the number of Chinese airports and duty free operators already attending, is fast establishing CTR as a definitive date in the Travel Retail calendar. We are hoping that over the coming weeks we will be able to announce more high profile speakers, delegates and sponsors coming to shanghai in July to attend our event”.

The China Travel Retail event and exhibition, taking place at the prestigious Marriott City Centre in Shanghai, will showcase best practices both domestically inside China, at Chinese airports and airlines, at sea, as well as how companies are successfully selling to Chinese consumers travelling overseas.  The two-day schedule for this event will include a mix of keynote speeches and master classes.

“Affluent Chinese travellers are looking for a better quality of service during their duty free shopping experience, and a better selection of products. In particular, they are looking for limited edition watches, or rare premium spirits, and not only from well known brands, but from more exclusive brands”, said Pierre Gervois, Chief Executive Officer of China Elite Focus.

“We believe that there is a need for an event that does not just showcase existing best practise within Chinese travel retail, but also helps companies to network, develop relationships and establish a footprint in this ever increasingly influential market”, said Nick Tan, President of GIS Events. “At CTR we will be bringing together for the first time, the most important decision makers from the Airports, Airlines, Duty Free operators, brands and Concessionaires in china and looking to break into this market.”

Chinese wealthy consumers’ new trends

Luxury goods marketers in China received some good news last month. After the country’s annual policy planning meeting, Minister of Commerce Chen Deming announced that Beijing would soon reduce tariffs and cut red tape on luxury goods imports. The decisions are in line with other policies that will stimulate domestic consumption and, the government hopes, will chip away at the globally contentious trade surplus that China enjoys.

The Chinese market for luxury products has been booming recently. In 2010, sales across categories such as jewelry, leather goods, and upmarket ready-to-wear clothing rose by 20% to reach $12.4 billion. By 2015, luxury goods sales will touch $27 billion — around 20% of global sales — making China the world’s largest luxury market.

There’s enormous potential in China, but marketers still face stiff challenges. Luxury consumers, although they’re relative newbies, are becoming more discerning and demanding, and marketers will have to change in order to appeal to a more confident and sophisticated Chinese consumer. Here are four insights from a survey of 1,500 luxury consumers we recently conducted:

Quality counts. Better quality is the reason to buy luxury goods, said 50% of the consumers we surveyed — up from 36% in 2008. Quality and craftsmanship are the top two considerations when making purchase decisions about ready-to-wear clothing, leather goods, jewelry, and watches. Smart companies have already realized this. A few months ago, Hermes held an exclusive exhibition in Shanghai, dubbed Leather Forever, which included a live show of Hermes’ bag manufacturing process accompanied by displays of raw materials used. Louis Vuitton stores deploy specialists who educate Chinese shoppers about the company’s heritage and how it crafts leather goods by hand.

The real thing. China is a haven for low-priced knockoffs, but luxury consumers are shunning the fake stuff. Just 12% of consumers said they would purchase fake jewelry, down sharply from the 31% who confessed they would do so two years ago. Some told us they would be embarrassed if someone noticed they were carrying a fake while others said they derived satisfaction from knowing that things they bought had appreciated even if they couldn’t be resold. One lady, for instance, was delighted to see the Chanel handbag she bought in 2008 for RMB 25,900 ($3,700) sell for RMB 30,800 in 2010 ($4,500).

Subtlety is chic. A growing number of buyers are shunning overt displays of wealth in favor of subtle ones. Contrary to popular impression, more than half of China’s luxury shoppers say they want less showy fashion — up from 32% in 2008. In fact, 41%, compared with 45% in Japan and 27% in the U.S., say that showing off luxury goods suggests poor taste. A maker of luxury watches told us that it had shifted from selling only flashy diamond-encrusted watches in China to more classic designs as well.

Service matters. The importance of service has shot up from 17% in 2008 to 30% in 2010. Two out of three consumers said they were disappointed with the indifferent attitudes and poor service of salespeople in China. In addition to training staff to be more courteous and patient, luxury marketers should re-examine how they define roles and compensation. For example, Louis Vuitton doesn’t tie the compensation of in-store specialists to sales, thereby ensuring that they concentrate on their task of communicating the brand’s heritage to shoppers.

Max Magni is the head of McKinsey & Company’s consumer practice in Greater China, and Yuval Atsmon is a partner in the firm’s Shanghai office.

Getting America’s retailers ready for the Chinese Tourist Boom

By Dr Xiang(Robert) Li, Professor at the College of Hospitality, Retail, and Sport Management, University of South Carolina, USA.

Thanks to their sheer number and spending power, “Chinese outbound tourists” has been the buzzword in the American tourism community for a while. Our recent study showed that the United States is the No. 1 “dream destination” of Chinese citizens; and there are at least 11.5 million Chinese who have been or are interested in traveling to destinations outside Asia.  Below are some suggestions for American destinations and business interested in turning this opportunity into business reality.

Build a unifying image.

The United States needs to centralize its promotions, create a clear brand identity, and deliver the message effectively. The fragmented efforts by different American destinations and businesses could confuse potential customers.

Become more visitor-friendly.

From visa application, customs procedures, to signage in major cities and attractions, the United States needs to show genuine hospitality and respect to Chinese visitors.

Understand your guests.

The new Chinese outbound tourists are savvy global travelers. American destinations and businesses need to better understand their preferences and expectations, which starts from conducting sophisticated marketing research.

Partner with Chinese travel trade.

At the current stage, most Chinese leisure tourists still travel to the U.S. in groups. Thus, the focus of marketing communication efforts is Chinese tour operators, travel agencies, and travel media.

Grab late-mover advantage.

The U.S. is unfortunately among the last couple of developed countries obtaining the ADS (Approved Destination Status). However, this also allows American destinations to observe and learn from other countries’ experiences and lessons.

(Article previously published in “The new Chinese Tourist”, March 2009)

For more information about Dr. Li, please visit his web site at

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