Luxury retailers must re-think their marketing strategies with wealthy Chinese travelers

Shanghai Travelers' Club - Audemars Piguet Ad- Chinese touristsA 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.
And 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.

Old stereotypes don’t work anymore for Chinese tourists in Europe

Shanghai Travelers Club- Chateau de la Barre- Chinese touristsEurope enjoyed a good performance of its tourism industry in 2012 as total arrivals grew by 3.5% last year. “With 476 million international tourist arrivals, Europe is the world’s largest destination, representing a 50% market share worldwide. This share might slightly shrink due to the strong growth of arrivals to other continents-especially Asia. But we will still remain a dominant force in the years to come”, explained at an ITB Press Conference Eduardo Santander, Executive Director of the European Travel Commission.

ETC comprises 33 National Tourism Organisations in Europe comprising most of the continent’s largest countries except France, the UK and the Netherlands which recently left the Commission. ETC has been attributed with a budget of one million euro to muscle its presence abroad, especially to overseas countries. Its website “visiteurope.com” was recently revamped and a new campaign done in partnership with the European Commission was also launched. “Ready for Europe” which showcases the wide variety of Europe through its arts, architecture, nature and landscapes might however miss its target – at least in Asia- due to its vagueness.

“We might have to adjust the campaign for some markets such as Asia where we still need to better understand what are the expectation in terms of product and image when talking about Europe”, admited Eduardo Santander.

ETC’s new strategic campaign towards long-haul markets will target in priority four markets: Canada, the USA, Brazil and China.

China has been identified as one of Europe’s fastest growing market segments. A study was recently released over the Chinese Outbound Market, made in conjunction with the UNWTO. ETC looked also at the Chinese profile. A netnographic study -“the Mind of the Chinese Traveller”- analyzed Europe’s perception as well as Chinese travellers’ behaviour through the prism of blogs and social media.

A China Day conference was also organized last November in Copenhagen while a similar conference will be organized at the end of October in Beijing. “We now need to recognize the specific status of Chinese travellers across Europe. It means that we should add more signs in Chinese in international areas, have more Europeans trained to speak mandarin, identify Chinese restaurants in cities as a majority of Chinese look only for their own food and develop specific products. We still have a long way to go,” recognized ETC Executive Director.

“The Chinese travelers coming to Europe today are very different than the first Chinese independent leisure tourists that came five years ago” said Pierre Gervois, Publisher of the prestigious Shanghai Travelers’ Club magazine, a publication for Chinese High Net Worth Travelers. Mr Gervois Added “The old stereotypes about Chinese tourists are no more valid: they now want to stay in the best suites of Paris and London most prestigious hotels, and don’t want to hear anymore about budget hotels!”

The ETC and Tripadvisor signed also during ITB a cooperation agreement paving the way to promoting Europe around the world.