Kering Group is struggling with Chinese consumers

Kering, the French luxury group, is adapting its sales approach to better cater for increasingly sophisticated Chinese customers, according to group managing director Jean-François Palus.
“We’ve changed the way we conduct our business in China and the way we address Chinese clients when they’re abroad,” said Mr Palus at the Financial Times luxury conference in Lisbon on Tuesday.
“We learnt that a very serious risk is to become complacent, to think that it’s an easy business, an easy customer base, easy to open stores with good products and then people will come in. That was true for a moment but Chinese customers have become sophisticated and highly demanding and we need to adapt.”
Chinese consumers account for more than 30 per cent of global luxury consumption, according to consultant Bain, which is forecast to increase to 35 per cent by 2020.
How much of global luxury consumption Chinese consumers account for, according to Bain, a figured set to rise to 35% by 2020
In the past, luxury houses relied on rapidly opening up stores in China to fuel growth amid rampant Asian demand for their products, but this approach has been undermined by an economic slowdown in China.
In the final quarter of last year, Chinese consumers showed signs of returning, although notably shopping more in mainland China, while tourism in Europe has slowed in part owing to recent terrorist attacks.
In China, Kering is retraining shop assistants and replacing email communication with WeChat, China’s most popular social media platform with more than 800m daily users.
Mr Palus said: “The way the Chinese treat very important clients is different — they have a very candid approach to wealth.”
He pointed to a recent visit to a Gucci store in Beijing where the store manager told him he had hired the daughter of a billionaire to work with clients in the shop “because to talk to wealthy people in China, you need to be wealthy”. He added that bad feng shui in a shop can hurt client traffic.
According to Pierre Gervois, the Founder and Publisher of the STC magazine, a luxury travel publication for High Net Worth Chinese global travelers “HNWI Chinese clearly signaled about  five years ago that they wanted to purchase luxury goods outside China, to enjoy the full experience of the iconic flagship stores in London, Paris or New York”
“This new trend has not been immediately recognized by luxury conglomerates such as LVMH and Kering, that led to an inflation of store openings in China in the years 2010/2015, with little customer traffic, insufficient staff training, and in some cases damaging consequences in terms of brand image.”, Mr Gervois added.
Kering posted a 31.2 per cent rise in revenues to €3.57bn in the first three months of 2017, lifted by a 34 per cent jump in sales from luxury activities.
Among its brands, Gucci led the way, posting record revenue growth of 51.4 per cent for the three months — the latest sign of improvement under creative director Alessandro Michele. Other Kering brands such as Brioni and Bottega Veneta were doing less well than the likes of Saint Laurent.
Mr Palus said: “The market has become more difficult and the pace of growth has slowed down. In this environment you need to take market share from the competition.”
Kering was not looking at acquisitions, added Mr Palus. “We have so much on our plate with helping our existing brands tap their potential . . . we don’t have enough time to think about M&A.”
He said that Kering was also still adapting to digital platforms. “We need to open ourselves to what’s happening in other industries and other countries. Our industry needs to become less product-centric and become more customer-centric.”

Source: The Financial Times.

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Mastercard Report Forecasts Exponential Boom in Outbound Travel from Asia Pacific’s Emerging Markets

Mastercard Bank of China - Gervois Hotel RatingAccording to the Future of Outbound Travel in Asia Pacific (2016 to 2021) report, Asia Pacific markets are expected to grow by 6 percent annually from 2016 to 2021.

Not surprisingly, the largest outbound travel market in 2021 is expected to be China with 103.4 million trips – constituting 40 percent of all Asia Pacific outbound travel, nearly four times that of the #2 and #3 markets being South Korea (25.6 million) and India (21.5 million) respectively.

Eric Schneider, Senior Vice President, Asia Pacific, Mastercard Advisors, commented, “The burgeoning middle class is driving the growth of outbound travel in Asia Pacific, along with other trends such as the emergence of the Asian millennial traveler and on the other end of the spectrum the senior traveler, as well as new technology and infrastructure developments. Asia Pacific travelers will continue to fuel global tourism growth in years to come, providing vast opportunities for businesses to benefit through the development of products and solutions that seek to improve their overall travel experiences.”

Woman reading Gervois magazine in a coffee“The United Sates is durably installed as the #1 outbound destination for Mainland Chinese travelers, for years to come.  With a multiple entry independent leisure visa easier to obtain for Mainland Chinese tourists, They see the U.S. as a leisure destination of choice”. said Pierre Gervois, Founder & President of Gervois Hotel Rating. “I’m pleased to see a growing number of Chinese travelers relying on Gervois ratings to choose their U.S. hotel prior to make a booking on Chinese hotel booking websites”, he added.

Myanmar is projected to be the fastest growing outbound travel market with a 10.6 percent annual growth rate over the next five years, followed by Vietnam (9.5 percent), Indonesia (8.6 percent), China (8.5 percent), and India (8.2 percent). Among developed Asia Pacific markets, the fastest growing are South Korea (3.8 percent), followed by Singapore (3.5 percent), Australia (3.5 percent) and New Zealand (3.4 percent).

According to the study, outbound travel is forecast to grow faster than real GDP. Outbound travel growth tends to be higher than real GDP growth for emerging markets compared to developed markets (except for Japan) where outbound travel growth is much closer to their forecasted real GDP growth. Emerging markets such as Myanmar (10.6 percent vs. 7.7 percent), Vietnam (9.5 percent vs. 6.2 percent), Indonesia (8.6 percent vs. 5.7 percent), Thailand (4.8 percent vs. 3.1 percent) and China (8.5 percent vs. 6 percent) are expected to grow faster than real GDP.

By 2021, all developed markets in Asia Pacific (except for Japan) will have a ratio of over 100 percent for outbound travel trips to total number of households. Households in Singapore (693.6 percent), Hong Kong (248.9 percent) and Taiwan (232 percent) have the highest propensity to travel abroad.

Among emerging markets, Malaysia is expected to record the highest ratio of 198.7 percent by 2021, whereas India (7.3 percent), Bangladesh (7.4 percent), Myanmar (14.6 percent) and Indonesia (15.4 percent) are among the lowest, indicating strong growth potential for outbound travel in these markets over the next ten to twenty years, assuming an increasing propensity to travel is combined with a healthy increase in households.

Mastercard, www.mastercard.com, is a technology company in the global payments industry.  We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories.

Gervois Hotel Rating, www.gervoisrating.com is a New York based hotel rating system for United States hotels publishing guest experience centered reviews and unbiased ratings. Gervois Hotel Rating is independent from hotel chains and hotel groups and is not affiliated with any hotel booking company.

Chinese travelers want personalized service

Chinese wealthy gentleman - China Elite FocusChina’s outbound luxury travelers spend $65,000 per household on tourism per year, including $34,000 on travel shopping, according to a new study from Marriott International.

Chinese outbound tourists have long been a high-priority group for luxury brands, but the demands and habits of younger travelers are changing quickly. The digital natives aged between 18 and 36 years old want a more personalized experience, including superior guest services and smart device integration.

China’s young luxury travelers go abroad between three and four times a year on average, primarily for leisure. While France remains the most popular destination in Europe, Japan is the preferred shopping destination given its proximity and favorable exchange rates, while Australia is the preferred leisure destination.

Australia has long been a developed economy, but it is less commonly seen as a haven for growth than North America, and luxury’s home in Europe has also pushed Australia to the back burner for many brands aiming to capitalize on China’s growing tourism rates. A strong presence in Australia could entice wealthy vacationers to make a purchase.

Moreover, western brands should be aware that summer travel is less common in China. National Day Golden Week travel in the early fall and travels for Chinese New Year are nearly two and three times as likely, respectively.

As with North America’s millennials, China’s young travelers get most of their travel information digitally, largely from official WeChat accounts, underscoring the platform’s importance. C-Trip, Qunar and Tuniu are also popular third-party platforms on which hotels should strive for good placement.

While the above generation is more closely defined by a desire for material goods, a reaction to globalization and advertising in the wake of China’s emergence from poverty, its young travelers strive for more adventurous travel. Hotels and retailers alike should tailor messages to these consumers to emphasize experiential components and offerings.

More specifically, over the next three years global travel is expected to increase 25 percent, while polar exploration grows 32 percent, adventure travel by 52 percent and road trips by 75 percent.

However, personalized service is still the biggest consideration in traveling for luxury travelers. Besides a liking for amenities, being able to choose pillows of different firmness and having a butler or personalized service through digital channels are also important. Seventy-three percent demand WiFi while 55 percent want smart TVs, while unique art and design are also high draws.

With luxury growth stalling around the world and quarterly earnings being largely at the mercy of Chinese tourists and which markets they enter, the country remains the top concern for marketers. As it transitions to a consumer-driven economy, China’s growth has fallen below the double-digits that were beginning to feel normal, but it still offers enormous opportunity.

Chinese residents will make 90 million outbound trips in 2020, with that number increasing by an additional 36 million over the following decade, according to a report by Euromonitor.

Outbound trips have increased on average by an impressive 13 percent since 2000, helping China overtake Japan as the second largest consumer market in 2011. With the significance and size of the Chinese tourist market only projected to swell, brands will need to develop a more nuanced understanding of the market in order to reach consumers. In particular sophisticated native advertisement campaigns in influential digital travel publications catering to China’s super-rich, such as the Shanghai Travelers’ Club (STC) magazine, give good results to reach China’s elite.

However, as brands cater to Generation Y consumers and look to the future, they must be as aware of generational differences in China as they are in the West.

In a reversal of the more materialistic tendencies of their parents, almost 95 percent of Chinese Generation Z consumers say it is essential for brands to be sustainable and environmentally conscious, according to a report by RTG Consulting.

The continued growth of China over the next several years will ensure that its consumers remain prime targets for brands for the foreseeable future, as even a slowed China exceeds the growth rate of western nations. As a result, brands will need to make a connection to this group, the first born in a fully modern China, in the interest of long-term success

Source: TheTopTier

In a twist, Trump’s administration policies could deliver more Chinese tourists and students for Australia & New Zealand

CHinese woman at home - China elite focusAustralia’s tourism and education providers may benefit from Chinese consumers holding a more negative view of the United States since the election of President Donald Trump, according to a new survey.

While China’s state media has pulled back on its outright hostility towards Mr Trump since his election, the survey of 2000 people from across the country found that 41 per cent of respondents viewed America in a less positive light.

“America’s soft power has historically provided a distinct advantage for many of its products and services in China, driving preference for travel and study packages, Nike shoes, iPhones and Frappuccinos at Starbucks,” said Mark Tanner the managing director of digital consulting firm China Skinny, which jointly commissioned the survey with research firm Findoout.

He said many Chinese people believed Europe to be unsafe, due to the threat of terrorism, and would therefore seek out other western-style destinations, such as Australia and New Zealand.

“The desirability of tourism and studying in America has decreased since Trump was elected,” said Mr Tanner.

“This isn’t just good for the travel and education sectors [in Australian and New Zealand], but has a wider impact as Chinese consumers develop affinities with food, property, fashion, health and a host of other products when visiting foreign countries.”

The so-called daigou trade, which has seen a spike in popularity of everything from A2 infant formula to Weetbix and Blackmores vitamins, was built around tourists coming to Australia and discovering these brands.

Many took the products home and then sought out Chinese friends or relatives living in Australia to send them regular supplies via the post.

This spawned a multimillion-dollar industry and often provided the basis for brands opening offices in China and beginning direct sales.

“New Zealand is a very popular destination for affluent Chinese travelers” said Pierre Gervois, CEO of China Elite Focus, the media agency which was in charge of the “Luxury New Zealand” campaign to promote the country to Chinese travelers from 2011 to 2013. “Chinese leisure travelers, real estate investors, businesspeople and students are choosing New Zealand as an alternative to European destinations or the United States”. The survey by China Skinny and Findoout found 18 per cent of Chinese consumers felt more negatively about buying property and stocks in the US, while 14 per cent were less inclined to travel there and 10 per cent were more negative on studying in the US.

Conversely, the rise of Mr Trump appears to have piqued interest in American culture in China with a small uptick in sentiment towards US movies, music, sport and the media. Chinese consumers have historically shown themselves to be sensitive towards geopolitical ructions. In September 2012 during a heated territorial dispute with Tokyo, Japanese automakers suffered year on year sales declines of up to 50 per cent in an otherwise buoyant market.

“Remarkably the results were consistent across respondents’ city tiers, gender, age and professions, signalling that Trump is impacting behaviour in every corner of China,” said Yu Bowei the chief executive of Findoout.

Source : Financial Review, original story by Angus Grigg

Tunisia Attracts More Chinese Tourists After Announcing Visa Exemption

Chinese passenger airport - china elite focusLast February 16, the Tunisian Ministry of Foreign Affairs officially declared the exemption of Chinese nationals in entry visas to Tunisia. However, conditions were also set in exchange of the said exemption.

General Director of Consular Affairs of the Tunisian Ministry, Chafik Hajji, was quoted as saying: “From today, the tourists of Chinese nationality will not need a visa to enter Tunisian territory, in the conditions of having a round-trip flight ticket and a valid hotel reservation voucher within 90 days.”

During the previous years, Tunisia has struggled to revive the country’s tourism after the occurrence of several terrorism attacks which killed over 70 civilians which had also included tourists from other countries. The country has exerted efforts to relive the tourism industry of the country. In fact, in 2016, 5.7 million foreign tourists visited Tunisia compared to the 5.3 million that was recorded in 2015.

China International Travel Service (CITS) in Shanghai office manager Fang Yi expressed that what makes Tunisia more appealing to foreign tourists are the World Cultural Heritage Sites in the country where unique and amazing cultural and traditional activities can be found.

“Thanks to its mild and humid Mediterranean climate, Tunisia could become a tourist destination in winter when it is cold in Europe, the traditional destination for Chinese,”Fang explained.”

Among the first Chinese citizens to experience this exemption was Wu Wenzhao, who is from Beijing. She came to Tunis, the capital and the largest city in Tunisia, for a business trip. Wu Wenzhao confirmed that she easily took a boarding pass and left the Chinese border. She added that it only caused her less than a minute to enter the territory of Tunisia after her plane landed.

Geographically speaking, Tunisia is placed between the Sahara Desert and the Mediterranean basin. It is also accessible to the Atlas Mountains which make the country more popular among tourists especially for adventure-seekers.  The Tunisia Welcome Service (WTS) believes that the visa exemption of Chinese citizens to Tunisia will boost the Chinese economic interests to country which will eventually lead to the improvement of the African market.

Source: Travelers Today

Europe Bets Big on Chinese Tourism but should leave to the States their marketing strategy

Chinese family - China Elite FocusIn a press event hosted by upcoming travel trade fair ITB China and its Chinese joint venture partner TravelDaily China, Europe laid out its plans for greater efforts to boost tourism between China and the EU.

Eduardo Santander, executive director of the European Travel Commission (ETC)—which represents European national tourism organizations—said that the European Commission is making huge investments in the 2018 EU-China Tourism Year. Santander argued that Europe as already reached the “awareness phase” in the Chinese market, and that the challenge now is to enhance Chinese consumers’ understanding of Europe as a destination. Santander also emphasized that Europe needs to understand the Chinese market better, and to look beyond the large cities in East China.

Even though the EU-China Tourism Year still lies a year into the future, efforts are being made to enhance the promotion of Europe as a destination already in 2017. ITB China, the Chinese counterpart of ITB Berlin—the world’s largest tourism fair—is hosting Visit Europe as its official partner destination for the inaugural event in May 2017, and outlined further collaboration during the tourism year in 2018.

The European Commission has also invested in what is called the World Bridge Tourism initiative; an EU initiative carried out by the ETC and the European Tourism Association (ETOA) that aims to grow the number of Chinese visitors to Europe by encouraging stronger business ties between European and Chinese tourism businesses. The initiative includes a conference as well as business workshops that bring European tourism suppliers and Chinese tour operators together, first for two days in Shanghai in conjunction with the ITB China fair, and later in the fall of 2017, doing a similar round of events on European soil. According to Tom Jenkins, CEO of ETOA, both events will host 150 European tourism suppliers and 100 Chinese tourism buyers. It was also announced that the EU had granted additional funding to carry out tourism workshops in both China and the EU to strengthen tourism ties further. The European Commission, which created the initial outline for the project, as well as funds the project, was also represented at the press event, briefly emphasizing the importance of Chinese tourism to Europe as a region.

But industry experts have a more cautious approach, like Pierre Gervois, Expert in marketing to Chinese outbound tourists, who declared “Europe in itself does not mean a lot for Chinese travelers. A coherent marketing approach should be done at country level, as each European country is so different, with different languages and cultures, promoting at the same time 28 very different countries is a waste of the European’s taxpayers money”

“European countries should promote themselves using their unique cultures.  For a Chinese traveler, you don’t dream on a trip to Europe, but to a trip to Italy and a trip to France, for example”, Mr Gervois added.

While strengthening the European tourism businesses with the help of Chinese tourism is a clear goal of both the World Bridge Tourism initiative and the 2018 EU-China Tourism Year, Santander also underlined that the designated tourism year “goes beyond tourism,” emphasizing the importance of more people-to-people interactions to reduce existing “misunderstandings” between Chinese and European people.

The event also hosted speakers from some of China’s largest tourism companies, including representatives from Jin Jiang Hotels, Ctrip, and Tuniu—all outlining their ambitions for future growth. Jin Jiang, which acquired Europe’s second-largest budget hotel chain, Groupe De Louvre, back in 2015 also has to ambition to expand in the European luxury hotel market. Ctrip, meanwhile, acquired Scotland-based Skyscanner to strengthen its position in the European market late last year. Tuniu, meanwhile, has partnered with ITB China and promises to send a large number of its buyers to the May event—where 40 percent of exhibitors represent European destinations and tourism businesses. While Europe may be looking to China for future tourism growth, it seems like large Chinese tourism businesses are looking to Europe for their own global expansions.

Sources: Jing Daily / ITB / European Travel Commission / ETOA

Private Jet charters for Chinese medical tourists

Chinese couple at home - China Elite focusChinese ultra-rich individuals use private jets for luxury overseas medical and wellness trips.

private jet chartering  sees a growing interest amongst Chinese ultra-rich individuals in luxury overseas medical and wellness trips.

The top destinations for mainstream Chinese medical tourists are Japan, Korea, Malaysia, the United States and Thailand.

The ultra-rich with a personal net worth of at least USD50 million however, are less price sensitive. They prefer to fly by private jet and are increasingly choosing to travel further abroad to Europe and the United States for more advanced treatments, drugs and technologies that are not available in China or the Asia Pacific region.

Global Growth Markets estimates that 4,300 ultra-rich Chinese sought medical care and health treatments overseas in 2015, spending over USD450 million on IVF, advanced cancer and cardiac treatments, stem-cell treatments, health check-ups and wellness programmes. On top of that, these ultra-rich patients spent over USD100 million on travel and sightseeing for these medical trips.Annual growth of 30% over the next few years is predicted, as more ultra-rich people will seek overseas treatment in the future.

Pierre Gervois, Publisher of the STC magazine, a luxury travel publication in Chinese Mandarin about the United States, said “The U.S. are the #1 medical tourism destination for High Net Worth Chinese patients.  We are working with the most prestigious hospital in the U.S., the Johns Hopkins International Medicine, to create for them a successful media campaign targeting very affluent Mainland Chinese patients”

China CMTHC digital media cluster editor Xue Chiao said: traffic as an important part of the medical tourism industry chain, the depth of participation in the industry has a unique advantage, development potential  is big.

L’voyage founder Diana Chou says: “We are seeing a growing number of inquiries about flying by private jet to France, Germany, Switzerland, the United States and the United Kingdom from our ultra-rich Chinese customers for the purpose of medical tourism. Not only are there advanced specialist hospitals in these countries, but also cultural landmarks and experiences that are popular with our clientele. Sometimes, relatives will travel overseas together for health checks and a family holiday. To cater to the growing trend in wellness and medical tourism, we cater our inflight menus to strict dietary instructions upon request and help pre-book return flights on the desired private jets for follow-up doctor appointments. At the moment, many of our Chinese ultra high net worth customers take off from airports in Beijing, Shanghai, Shenzhen, and Guangzhou but we expect a gradual increase in flights from interior cities, such as Dalian, Chengdu, and Chongqing, where the population of ultra-rich individuals is set to grow at a faster rate than other cities.”