Targeting Affluent Chinese shoppers the Bloomingdale’s way: Talking to the heart of Chinese tourists planning a U.S. trip

Bloomingdale's Interviews -Shanghai Travelers Club May 2015 -7The growing purchasing power of affluent Chinese travelers is making it more important than ever for luxury brands and luxury retail brands to adopt marketing strategies to target them. With Chinese third-party mobile payment systems like Alipay and WeChat Pay beginning to set up shop in popular global tourist destinations, catering to this traveling consumer is becoming easier to do, but it’s not a brand’s only option.

Digital intelligence firm L2’s recent report “Cross-Border and Travel Retail: Connecting Digitally with China’s Shoppers” discusses ways brands can be targeting consumers online both during their journey overseas and before they set off.

“[Luxury brands] are under-serving the traveling Chinese consumer, whether it’s through their own brand site and its functionality and capability, their WeChat account, or from leveraging things like WeChat Pay and Alipay,” said Danielle Bailey, head of Asia Pacific Research at L2. “It’s a huge missed opportunity for them to not engage on these platforms that Chinese consumers are using all the time. Their phone is their number one travel accessory.”

Brands that do engage consumers digitally abroad with an omnichannel approach are using platforms like Alipay’s “Overseas Travel Channel (支付宝境外游)” to give travelers exclusive gifts, better exchange rates, or let them find deals near where they’re going, all within the app on their mobile device. WeChat’s website within an app feature gives consumers the opportunity to reserve a product online to pick up in a store and access store locators in their own language that they can hand to a taxi driver en route.
But about half of Chinese travelers are doing research on what they want to buy abroad before they leave, and luxury brands have been adopting strategies to target these consumers, according to L2.

Bloomingdale's Interviews with Chinese customers -Shanghai Travelers Club May 2015 -4In a dissent opinion, Pierre Gervois, Publisher of the STC magazine, a digital travel media in Chinese Mandarin, said “The most important for retailers is not the way Chinese shoppers are going to pay. It’s a technicality. Chinese Customers who want to make a purchase have plenty of options: Cash, credit Cards or WeChat Pay.  The really important thing to do is to convince them to choose a particular retailer”
“Too oftenly, we see U.S. retailers being obsessed by Chinese mobile payment systems when their strategy should be focused on branding their image to Chinese millennial travelers, and create an emotional connection with their future customers, based on their brand values”, Gervois added.

A good starting point is to provide an international store locator on their official online store in China, a strategy about 72 percent of brands employ. However, brands can also take it a step further by adding a Chinese-language travel retail site that let shoppers research the products, compare prices, read reviews, view maps that direct them to duty free shops, and even let them purchase the product online in advance so that they can simply pick it up at the airport if they’re in a hurry.
To help consumers find these pages, brands are paying for search term generated Baidu ads. L2 lists the efforts of beauty brands as an example—many brands pay for cosmetics-related key words, while others, like Lancôme, are taking a more travel-centric approach, targeting consumers researching phrases like “South Korean vacation.”

Some high end retailers, such as Bloomingdale’s, choose a more qualitative approach, and advertise in luxury digital travel publications about the U.S., like the STC magazine, available for mobile but also in digital inflight entertainment.

Bloomingdale's Interviews with Chinese customers -Shanghai Travelers Club May 2015 -3With a very creative advertising campaign created by China Elite Focus Magazines in New York, they organized interviews of actual Mainland Chinese customers while shopping at their Third avenue flagship store.  The story of six actual Chinese Bloomingdale’s customers has been published in the digital edition of the STC magazine: It has much more impact than buying keywords on Chinese search engines and directly talked to the heart of Chinese consumers.

While maintaining an engaging physical presence in airports and shopping malls is always important for marketing to the Chinese shopper abroad, brands that understand how to make the most of China’s digital sphere are likely going to more efficiently connect with Chinese travelers who are in the process of creating their luxury goods shopping list for their next overseas vacation.

Source: Jing Daily / Skift / Chinese Tourists Blog

Major duty-free stores yet to be affected by dwindling Chinese tourists over THAAD deployment

Young Chinese shoppers - China Elite FocusSouth Korea’s major duty-free shops have been operating in the black in recent months despite the number of Chinese tourists declining over the country’s plans to deploy an advanced US missile defense system, industry sources said Monday.

Chinese travel agencies in recent weeks spent sales of tour packages to South Korea as part of the Beijing government’s retaliation against Seoul’s decision in July to have the Terminal High Altitude Area Defense system deployed on South Korean soil later this year. South Korea says the missile system will not target China but only counter threats from North Korea.

HDC Shilla Duty Free said it posted a surplus of 125 million won ($107,982) on 53.2 billion won in sales in January.

It is the first time the joint venture between Hotel Shilla Co. and Hyundai Development Co. recorded a monthly surplus since its opening in December 2015.

HDC Shilla also had 1 billion won in operating profit on 67 billion won in sales in February.

The company suffered 20.9 billion won in operating deficit on 397.5 billion won in sales last year.

Shinsegae DF said its Myeongdong branch in downtown Seoul recorded an operating profit of 1.2 billion won on sales of 75 billion won in January in the first operating profit since last May when the Myeongdong branch opened.

Hanwha Galleria, an affiliate of Hanwha Group, and Doota Duty Free Shop, run by Doosan Group, said they have been improving in recent months with their daily sales surpassing 1 billion won each.

Hanwha Galleria logged an operating loss of 43.8 billion won and Doosan a loss of 30 billion won last year.

The duty-free industry, however, may face tough business conditions in the coming months when the country is expected to receive fewer Chinese tourists in the aftermath of the Chinese government’s retaliation.

“The current geopolitical climate between Korea and China is certainly an issue for Korea’s duty free and retail industry.” declared Pierre Gervois, CEO of China Elite Focus, and Publisher of the STC magazine, a travel magazine in Chinese language.

Chinese clients account for about 80 percent of the sales for South Korea’s duty-free shops, according to industry data.

“We are trying to come up with measures for stainable management of the business while refraining from excessive and cutthroat competition to achieve sales and profits at the same time,” a HDC Shilla official said. (Source: Yonhap)

By 2015, Chinese tourists could spend more than all the world’s luxury shoppers combined

Chinese tourists Hermes - Niuyue MagIn two years, Chinese tourists could be spending as much as $194 billion a year in Europe, the US, Asia and other vacation spots. That’s according to Morgan Stanley, in a research note on luxury companies.
That figure speaks of the growing economic clout of China’s middle class—but also the irony that so many are spending their wealth abroad when one of the country’s priorities is boosting consumption at home. Last year, Chinese travelers became the world’s biggest spenders, shelling out about $102 billion overseas, according to the United Nations World Tourism Organization (UNWTO)
There will be an estimated 100 million Chinese traveling abroad by the end of 2015, according to the UNWTO. Morgan Stanley compared the spending of these Chinese travelers with estimates from McKinsey of the luxury goods market, and found a remarkable result: by 2015, total Chinese spending abroad will exceed total global luxury sales, having been only one-third of the total in 2008.
Many of these travelers buy Western or designer goods abroad because import duties and other taxes add up to 60% to their prices in China, compared with cities like London, Paris or Hong Kong. Chinese business leaders have been calling on the government to cut taxes to lure luxury shoppers back home, but there are few signs it will do so. Its reluctance may be partly down to the association of designer goods in China with corrupt officials.
Campaigns against government graft and conspicuous consumption have also played a part in sending luxury spending abroad. In 2012, the year that then-prime-minister Wen Jiabao called for a crackdown on corruption, growth of luxury sales in China slowed to 6%, but Chinese luxury spending abroad increased 37%, according to estimates from the consultancy Bain. This year, amid president Xi Jinping’s crackdown, luxury sales have tumbled for high-end liquor, watches, and more.
Even if they’re not appreciated at home, wealthy Chinese shoppers remain coveted the world over. The city of Paris released a manual to try to help locals understand and appeal to the visitors. In Australia, a coastal town near Sydney is building a $500 million theme park that includes a full-size replica of the gates leading to Beijing’s Forbidden City.

Luxury retailers must re-think their strategies with wealthy Chinese shoppers

A report from the Beijing-based World Luxury Association found that luxury spending in China last month fell to its lowest level in five years. Affluent Chinese spent $830 million on luxury goods in China — half of what they spend last year. The month included the important Chinese New Year holiday, which is critical for Chinese tourism and spending.
The report predicts the Chinese luxury market is slowing from double-digit growth to single-digit growth.
But that doesn’t mean the Chinese weren’t spending. While spending on luxury at home was down, the Chinese spent big on luxury abroad.
They spent $8.5 billion on luxury goods overseas during the month — an 18 percent gain over last year. The report said the Chinese accounted for half of all the global luxury products’ consumption during the period and remain far and away the largest luxury consumers in the world.
Such a huge share of the market may not be sustainable over the longer term, of course. Most luxury experts say Chinese consumers will account for about a third of the global market by 2015.
shanghai-travelers-club-audemars-piguet-ad-chinese-touristsAnd the overseas spending will drive much of that growth. The Chinese are buying more luxury goods overseas primarily because they’re cheaper. The Chinese are also traeling more and they prefer buying luxury brands overseas because there is less likelihood of fakes (presumably they’re buying more on Fifth Avenue and the Champs Elysees than along Manhattan’s knock-off row, on Canal Street.)
Hong Kong, Taiwan and Macau are still the most popular markets for Chinese luxury shoppers but about one in five Chinese consumers are now buying luxury goods in Europe (mainly Paris) – a share that’s doubled over the past two years, according to reports from McKinsey & Co. and KPMG.
A smaller but growing share of Chinese consumers is buying goods in the U.S., including New York and Los Angeles, the reports show. According to the Shanghai Travelers’ Club, the Chinese luxury travel magazine for very affluent Chinese travelers, the average spending in New York City  for affluent Chinese tourists is between $15,000 and $50,000, mostly in jewelry and watches.  “This new generation of affluent Chinese customers has a purchasing behavior that has not been predicted by any traditional economic models, and the retail industry must innovate to attract these customers” said Pierre Gervois, Publisher of the Shanghai Travelers’ Club magazine. He added “Audemars Piguet, for instance, has worked with us to target specifically wealthy Chinese tourists in New York City, that is a smart move”
The high costs of luxury goods in China is due mainly to stiff government taxes, which can range between 20 percent and 70 percent on some luxury goods. A designer bag can cost 40 percent less in Paris, for instance, than in Shanghai. While the government may be considering a reduction in those taxes, a report from McKinsey called “Luxury Without Borders” predicts that the Chinese appetite for luxury abroad will continue.
“The price gap is likely to remain substantial in the next two to three years,” the report said, “and assuming it does, Chinese spending on luxury goods will grow about as fast overseas as it will domestically.”
McKinsey said the migration of Chinese luxury spending makes it even more important for luxury retailers to maintain a consistent image in China and abroad.
Marc-Andre Kamel, a retail and luxury expert at Bain & Co. said luxury companies are also installing special payment systems for Chinese consumers and adding more salespeople who speak Mandarin.
He cautioned, however, that the big flagship luxury stores in Paris and other Western cities need to be careful of the long lines and crowd problems associated with an influx of Chinese tourists.
“They need to be mindful of their other customers, as well,” he said.