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

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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Bloomingdale’s smart strategy to target affluent Chinese shoppers in New York

Bloomingdale's advertising in Shanghai Travelers Club magazine - China Elite Focus 2015We have all seen these cheezy advertising campaigns made by department stores or western brands trying to attract Chinese tourists in the last years: Be assured that affluent Chinese tourists were also smiling…  But it is going to change. Exit the low quality shopping publications targeted to Chinese tourists that ended in the hotel rooms trash bins. U.S. and European Luxury brands and high end retailers start now to advertise seriously with affluent Chinese tourists.

Although luxury sales in mainland China have still remained in slowdown mode in 2015, and Hong Kong has recorded a significant slump as well, Chinese spending remains a potent force in the global luxury industry, propping up growth rates in developed markets worldwide.
This week, Hermès reported a 22 percent increase in global sales in the sAdvertisement Tower - Gervois Hotel Rating May 2017 featuring Pierre Gervoisecond quarter, with sales in Japan leaping 33 percent—a figure attributed in large part to an influx of big-spending Chinese tourists attracted by a weaker yen and easier travel. On a global scale, Chinese travelers are spending lavishly: a recent Global Blue report found that Chinese tourist spending jumped 87.8 percent in June, while spending on leather goods in Europe grew by an even more staggering 93.7 percent. Year-to-date spending growth sits at a whopping 110 percent.
These numbers contrast sharply with the situation in mainland China and Hong Kong, one that is particularly striking in formerly triumphant Hong Kong. Last week, Burberry reported a “double-digit percentage decline” there for the three months ending in June, while sales of Swiss watches in the former British colony were down 21.2 percent in June, despite 3.3 percent growth worldwide.

Woman reading Gervois magazine in a coffeeThese numbers further support the trend that growth is following Chinese tourists abroad, and brands need to keep up with their changing location preferences for travel—engaging outbound shoppers before they leave China and when they arrive overseas. Recent stats also illustrate the ever-shifting tides of Chinese travel patterns. Whereas Japan was, just a few years ago, faced with a Chinese tourist slump (caused in no small part by Sino-Japanese political tensions), the country is seeing a wave of Chinese arrivals and spending, owing to cooling attitudes toward Hong Kong and South Korea’s currency fluctuations and MERS outbreak.
Amid these rapid and unpredictable changes, what is clear is that brands need to have plans in place to quickly jump on opportunities, and ensure they’re able to reach and influence the Chinese outbound consumer wherever he or she happens to be in the world.
“Luxury retailers like Bloomingdale’s have well understood the importance of targeting affluent Chinese tourists”, said Pierre Gervois, CEO of China Elite Focus and Publisher of the Shanghai Travelers’ Club magazine, a high end publication in Chinese language for High Net Worth Chinese global travelers. “Bloomindale’s and the Shanghai Travelers’ Club magazine have launched a very creative marketing and PR campaign this spring showing actual Chinese customers and what it feels like to shop at the iconic Bloomingdale’s store in NYC.” Gervois added. This campaign has generated a considerable attention on Chinese social media and is the first ever campaign focused on the Chinese customer and the overall shopping experience in a U.S. luxury retailer. An example to follow for the industry.

Source: Jing Daily / Chinese Tourists Blog / Chinese tourists in America

Average Chinese shopper spends $6,000 per California visit

Affluent chinese tourist - china elite focus magazinesAccording to the California Travel and Tourism Commission, Chinese tourists’ average spending of $6,000 per person during a trip to the US is the highest in the world. Wide selections of designer’s bags and shoes drive Chinese to California on shopping sprees. A 7,000-member Chinese tour group traveled to California last summer, and each member spent $10,000 on average during their one-week stay.
The biggest driver of this growth appears to have been the visa policy approved by Chinese President Xi Jinping and U.S. President Barack Obama in 2009. At the Asia-Pacific Economic Cooperation meeting in November 2014, the two leaders agreed to extend tourist visas to 10 years and student visas to five years.
Following the November agreement, U.S. consulates in China have recorded a 68 percent increase in visa issuance, indicating a spectacular increase in the plans for Chinese to visit the U.S. in the future, with most coming at least initially to California.
At the fall 2014 “Visit California Outlook Forum” attended by over 500 California tourism industry professionals at La Quinta Resort in Palm Springs, experts predicted that Chinese visitors will spend $2.2 billion in California in 2015 and 2016.
The China Daily reported that Kathryn Smits of International Tourism at the Los Angeles Tourism and Convention Board told the Forum that airline service between China and California major gateways of Los Angeles and San Francisco has increased 44 percent.
Chinese airlines have added new direct flights from Los Angeles to cities in China or plan to add flights due to the availability of Chinese-language services to assist travelers. In July, Air China will add a third daily direct flight from Los-Angeles and Beijing and China Eastern Airlines will start direct service to Hefei, in southeast China. Both airlines credit the relaxed visa policy for accelerating growth.
GERVOIS magazine Spring 2017 coverThe Beverly Hills Visitor Center commented that more than half of the premier stores in Beverly Hills now employ Mandarin Chinese-speaking salespersons. Most stores in Beverly Hills stores accept China’s Union Pay credit card. Five-star Beverly Hills hotels now feature Chinese-style breakfasts and house slippers year round. The Visitor Center also provides shopping maps and discount coupons printed in Chinese. The Shanghai Travelers’ Club magazine, China’s most prestigious luxury travel magazine has endorsed Beverly Hills as a top U.S. destination for High Net Worth Chinese. It helps.
Well-heeled Chinese tourists seem to like what they have seen on their visits to the Golden State. Southern California real estate agent Le Yuan told the China Daily that he had seen a double-digit increase in clients this January. Many Chinese clients can fly here to see the houses and neighborhood,” Le said. “Travel is just so easy.”
Source: Breitbart

International retailers waiting for the US$264Billion Chinese spending by 2019

Young Chinese shoppers - China Elite Focus

Book your holiday now, before a wave of 174 million Chinese tourists snap up the best bargains.

Already the most prolific spenders globally, the number of Chinese outbound tourists is tipped to soar further as the millennial generation spreads its wings.

Here are the numbers: 174 million Chinese tourists are tipped to spend $264 billion by 2019 compared with the 109 million who spent $164 billion in 2014, according to a new analysis by Bank of America Merrill Lynch. To put that in perspective, there were just 10 million Chinese outbound tourists in 2000.

How much is $264 billion? It’s about the size of Finland’s economy and bigger than Greece’s.

“China-mania spread globally in the past few years, akin to when the Japanese started travelling some 30 years ago, when the world went into frenzy then, pandering to Japanese customers’ needs,” the analysts wrote. “In our view, this is going to be bigger and will last longer given China’s population of 1.3 billion vs Japan’s population of 127 million.”

Millennials, or 25- to 34- year olds, are expected to make up the bulk of Chinese tourists at 35% of the total, followed by 15- to 24- year olds accounting for around 27%.

“Chinese travelers now massively prefer to shop overseas. Buying a luxury product in Mainland China is seen as “Uncool” and shows that you can’t afford to travel to New York city, Paris or London to buy at the original brand ‘s flagship store” says Pierre Gervois, Publisher of the New York City based Shanghai Travelers’ Club magazine.

Only about 5% of China’s 1.3 billion populace are thought to hold passports, meaning the potential for outbound tourism is vast.Gervois Rating Banner 01

The projected boom could be good news for the global economy. The Chinese are the world’s biggest consumers of luxury goods, with half of that spending done overseas. Chinese visitors to the U.S. have risen more than 10% since 2009, the fastest pace for a destination outside of Asia. Australia, France and Italy are also popular.

Asian markets stand to benefit, with the biggest uptick tipped for Japan, South Korea and Southeast Asia, according to the research led by Billy Ng in Hong Kong.

Source: Chinese tourists Blog / Bloomberg / Bank of America

Japanese Department stores promote their brands to Chinese shoppers

Japan

With the number of Chinese visitors to Japan exceeding 2 million for the first time in 2014, Japanese store operators are racing to China to promote their outlets for prospective tourists to Japan.

Don Quijote Co., the operator of Don Quijote discount stores, which have been a popular destination for Chinese tourists to Japan, opened a liaison office in Beijing on Jan. 8.

While the company has not made marketing efforts in China, its outlets are known among Chinese tourists by word of mouth as stores where they can buy a bundle of electrical appliances, brand fashion items and cosmetics at discount prices.

The liaison office will work with travel agencies in China to promote Don Quijote stores to be included as stops in package tours.

“We will promote our stores by letting people know that we are open until late in the evening for the convenience of tourists who have a limited amount of time,” said a company official in charge of overseas marketing.

Don Quijote also plans to open a special website in February, which will allow foreigners planning to visit Japan to reserve items they plan to buy beforehand.

The number of Chinese visitors to Japan totaled 2.22 million during the January-November period of 2014, up 82 percent from the total number in 2013.

While the soured diplomatic relations between the two countries continue, the rapidly weakening yen in 2014 has made Japan an ideal shopping destination among Chinese overseas travelers.

Also on Jan. 8, major credit card company JCB Co. announced that it will release credit cards in China that provide special services and offerings for users during their visit to Japan.

The holders of the cards will be eligible for courtesy tickets to various sightseeing spots in Japan, free rental of mobile Wi-Fi devices for Internet connection and other special offerings.

The company also provides a free smartphone app for Chinese tourists, which offers sightseeing information in Tokyo.

Among the operators of major department store chains, Isetan Mitsukoshi Ltd. will distribute brochures promoting its stores in Tokyo and Kyoto at its outlet in Shanghai from Jan. 16.

The Shanghai Travelers’ Club magazine will also publish special luxury shopping content about Japan’s premium retail stores to further promote Japan as a leading luxury shopping destination in 2015.

J. Front Retailing Co., the parent company of Daimaru Matsuzakaya Department Stores Co., has also distributed brochures introducing its 10 major outlets in Japan at about 360 travel agent offices across China.

Social Media & Shopping Influence for Chinese tourists

Chinese shoppers spendingXiaoyan Mao had not yet collected her luggage after landing at Charles de Gaulle Airport from Shanghai recently. But she and a friend were already mapping out a game plan for the three days they would spend in Paris before continuing a 10-day European blitz with additional stops in Switzerland, Italy and Germany.
Their to-do list included visiting the Louvre and the Eiffel Tower. But what were they looking forward to most on their first trip to the region?
Ms. Mao, 28, a sales manager, smiled broadly. “Chanel,” she said. “Prada.”
Tourists like Ms. Mao are part of a growing wave of newly affluent Chinese taking advantage of more direct flights to the shopping capitals of Europe. The Lunar New Year holiday is now underway, a time when a big part of the 110 million Chinese expected to travel abroad this year will be packing their bags — and their wallets — for luxury expeditions.
And purveyors of European luxury brands, anticipating the arrival of this important clientele, stand ready to embrace it, whether by offering guided tours, in Mandarin, of flagship showrooms; providing backstage access to couture runway shows; or engaging in a variety of other flourishes tailored for the Chinese tourist-shopper.
Storied European brands like Burberry, Hermès and Dior can be bought in high-end shops and shopping malls of major Chinese cities, of course. But for reasons including higher taxes in China and lower prices in Europe, Chinese consumers, who buy more luxury products than shoppers of any other nationality, prefer to do their buying abroad. Of the more than $80 billion in Chinese purchases of personal luxury goods last year, two-thirds were made outside China.
Flagging demand in China itself was a factor cited last week by the Paris-based LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods group, for the company’s flat profit last year. That is all the more reason the company and many of its peers are starting to plow more money into European showcases and shift investments away from the Chinese mainland.
Last year, for example, Louis Vuitton opened a three-store, 10,000-square-foot “townhouse,” complete with spinning glass elevator, atop a Selfridges department store on Oxford Street in London.
“There is a major shift happening now with brands,” said Manelik Sfez, head of marketing for Global Blue, a tax-refund company in Geneva that tracks luxury purchases. “They are starting to reconsider their whole structure and the ways they market themselves.”
In catering to the Chinese shopper, some European makers of luxury goods seek to leverage their brands’ heritage and savoir-faire by conducting tours of their landmark European stores — or even setting up museums in them, as Vuitton has done with its “Espace Culturel” on the Champs-Élysées in Paris. Others organize invitation-only demonstrations of the craftsmanship that goes into the products, which companies and analysts say holds a particular appeal for Chinese visitors.

Gieves & Hawkes, the 240-year-old London tailor, for example, lures Chinese groups away from the bustle of Bond Street to its store at 1 Savile Row, which houses an extensive archive of royal and military regalia dating to the 18th century. The visit, which is translated by a Mandarin-speaking guide, includes a stop in the store’s bespoke workshop, where the company still hand-sews 1,000 suits a year.
“In terms of seeing all the components of a luxury brand, it is very immersive,” said Simon Baker, marketing director for the company, which has more than 100 stores in China. “Our Chinese guests are looking to learn what being dressed by a Savile Row tailor is all about, and why it is more luxurious and prestigious.”
The Italian design house Ermenegildo Zegna works with boutique travel agencies, and hotels favored by affluent Chinese, to offer V.I.P. tickets and backstage passes to its European fashion shows.
Zegna has also followed brands like Louis Vuitton and Burberry, already active on the social media platform Sina Weibo, in creating an official account on the wildly popular mobile messaging service Weixin — known outside China as WeChat . So has Harrods, the London department store, which counts Chinese visitors as its largest foreign customer group.
Such efforts are part of the image burnishing that analysts say is as important in marketing to these visiting consumers as selling individual wares.
A Chinese tourist who returns home with a memorable experience to share can be a powerful ambassador for a brand, said Philip Guarino, co-founder of the consulting firm Emerging Market Luxury Advisors.
“You are dealing with a demographic, not a geography, so you need to think in nongeographic terms,” Mr. Guarino said. “Some brands have 150 store locations in China alone,” he said. “But their cash registers are in Europe and the United States.”
Just how dependent the European luxury sector has become on Chinese visitors became starkly evident late last year. In October, China passed a consumer-protection law prohibiting travel agencies from subsidizing group tours to Europe by including mandatory stops at high-end department stores like Galeries Lafayette in Paris or La Rinascente in Milan.
Beijing considered the practice — whereby mass-market agencies used commissions from retailers to offset deeply discounted package tours — to be misleading. Mr. Sfez, of Global Blue, estimated that before the law changed, such captive buying represented roughly 40 percent of all Chinese luxury purchases in Europe.
The law had a striking effect on Chinese tourists’ luxury spending in the fourth quarter, halving sales growth across the European Union to 9.5 percent compared with growth rates of 20 percent or more in the preceding three quarters of last year.
But analysts do not expect a reversal of the broader trend, because higher prices in China compel so many Chinese to prefer shopping overseas. Luxury handbags, which might sell for $1,000 to $5,000, cost on average nearly a third less in Europe than in mainland China, according to Renaissance Capital, a Russian investment bank. Markups by Western brands are common in China, where foreign companies must navigate a thicket of red tape to do business and pay high rents for premium retailing space.
The price gap is further widened by China’s high taxes on consumers. On top of an import duty of 10 percent, Beijing levies a value-added tax of 17 percent and sales taxes that can range from 5 percent to 20 percent, depending on the item. Some other Chinese cities add taxes as well.
Foreign visitors to the European Union who spend more than 175 euros, or $236, in the same store on the same day, meanwhile, are entitled to a rebate on the value-added tax, which in most member states hovers around 20 percent.
Chinese consumers’ embrace of the Internet and social media platforms like Sina Weibo has also increased access to information about luxury goods abroad, allowing them to comparison shop before they even board a plane. Applications like Weixin let people share their foreign shopping experiences in real time, check prices and send photos as they weigh their purchases — or even take orders on behalf of friends back home.
Digital travel magazines, such as the Shanghai Travelers’ Club, have also their Sina Weibo page and publish a curated content about little known luxury brands, as well as tips on how to purchase a private jet or a private island.
Armed with these digital tools, a growing number of Chinese travelers, particularly younger ones, are forgoing the classic group tours and venturing abroad independently. That trend, with the ban on commission-subsidized tours, is driving more tourists to explore beyond the big European flagship stores in the fanciest districts, analysts said.
It also exposes entrenched legacy brands to intense competition in China from increasingly popular rivals like Bottega Veneta of Italy or Mulberry of Britain.
That means the bigger design and fashion houses will need to be more nimble than ever in adapting to the changing habits of their Chinese clientele, according to Federica Levato, a luxury analyst in Milan at the management consultants Bain & Company.
“If they don’t catch up quickly, they will become less competitive,” Ms. Levato said. “Just as they anticipate fashion trends, they now have to anticipate changes in consumer behavior.”

Source: New York Times

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.