LONDON, United Kingdom — In Europe’s fashion capitals, the sight of Chinese tourists, laden with shopping bags from luxury retailers, has become as familiar as the sight of the free-spending Americans and Japanese who preceded them. But this week, the flow of Chinese visitors snapping up clothes and accessories in the flagships along Bond Street and the Avenue Montaigne is widely expected to be heavier than usual. Golden Week is here.
On the first of October each year, the Chinese celebrate the founding of the People’s Republic of China with a national holiday now referred to as Golden Week. It is one of two Golden Weeks in the Chinese calendar; a second, which coincides with the Chinese Lunar New Year, begins each year in January or February.
During these holidays hundreds of millions of Chinese hit shopping malls, department stores and boutiques, buying gifts for others as well as presents for themselves. Indeed, shopping has become a fundamental part of the Golden Week festivities, driving total retail sales of $127.4 billion during the holiday, according to China’s state television broadcaster, CCTV, with a significant portion spent on luxury goods.
“Giving gifts is huge part of Chinese culture, and watches, jewellery and other small items are among the favourite choices,” said Ming Ming Dong, the director of Sinolink, a company that provides a range of communication services to bridge the gap between China and the West, including international tax-free shopping assistance.
International tourist spend
During Golden Week, millions of Chinese also set off on vacation. In the past, much of this travel was domestic. But today, many affluent Chinese choose to spend Golden Week abroad, something that did not take long to come to the attention of luxury retailers in Paris and London.
"Chinese shoppers represent the most significant — and rapidly growing — proportion of our international customer base and over the last five years Harrods has seen an increase in the number of customers visiting the store during Golden Week," Michael Ward, managing director of Harrods, told BoF.
In order to cater to Golden Week tourists, Harrods is selling a specially designed Mikimoto Double Eight collection (the number 8 symbolises luck and fortune in China). “In time for the [Golden Week] holiday, we have also launched an official Harrods WeChat account, as well as multiple Harrods iPad apps in Mandarin. These digital tools, as well as the official Harrods Sina Weibo account ensure our Chinese customers can easily access information on Harrods products and services.” The store has also installed over 90 China UnionPay terminals, over 70 Mandarin speaking staff and expanded Harrods’ Global Blue Tax Free Shopping services.
But it's not only London retailers who are eagerly tapping the Golden Week opportunity. “We noticed in 2005 strong traffic of tourists from Greater China during this period of national holidays… We started, back then, to organise Golden Week-dedicated [initiatives] in order to propose specific services and events for these clients,” said Pierre Pelarrey, general manager of the Parisian department store Printemps Haussmann.
“For this year, we have Burberry as our major partner for the Golden Week period, during which there is a Burberry pop-up store, special shop-windows and in-store merchandising, as well as limited edition collections, only for Printemps. We have also organised special events, like exhibitions of luxury timepieces from Piaget, this year during the period,” he added.
China’s outbound tourism market is now larger than that of Germany and the United States. Meanwhile, in Europe's fashion capitals, Chinese tourists now outspend their US and Japanese counterparts (the big spenders of previous decades), as well as visitors from Russia and the Middle East.
“From the research that we have done, 82 percent of Chinese travellers that visited the UK say that the right shopping was a vital part of their trip. If you compare that to the Middle East, 56 percent of them said that it was a vital part and 48 percent of Russians,” said Gordon Clark, the UK managing director of Global Blue, a shopping tourism company which operates in 43 countries and completed approximately 31 million tax-free transactions last year on behalf of partners including LVMH, Kering, Richemont, Hermès, Prada, Burberry, Harrods and Selfridges, among others.
“The average spend of the Chinese tourist on Bond Street was £1754 (about $2800 at current exchange rates); in the West End, overall, it was £1386. If you compare that to the total West End, including all nationalities, which averages at £805, you can see that [the Chinese] are spending on average £500 more than the average of all the other nationalities,” continued Clark.
Indeed, it seems that Chinese luxury consumers do not shop on holiday as much as holiday to shop. And with high domestic import tariffs, which make luxury goods purchased in China on average 30 percent more expensive than in the West (not including the additional 14 to 15 percent refund on tax-free purchases), they seem likely to continued doing so. According to a report by McKinsey & Co, a consulting firm, nearly 70 percent of Chinese luxury consumers prefer to buy their goods abroad.
Point of origin marketing
But in order to tap the opportunity efficiently, it's vital that European retailers advertise to tourists in China before they select a destination and set off.
“Chinese travellers do their planning about three to four months before they travel — and they will plan out which stores they are going to visit, which products they are going to buy and where the location of these stores are," continued Clark. "Because their itinerary is quite tight they don’t normally have time for browsing, so what we are saying to retailers is, ‘If you don’t advertise properly in China, you are running the risk of not getting that lucrative business coming through your door.’ If you don’t give them that pre-planning stage, you will lose out on that business.”
Global Blue’s partners all advertise heavily in China to attract tourist spending, said Clark. “We have a website in China which is approved by the Chinese government, so it will appear on web searches. We basically host microsites that are translated in to Mandarin for retailers,” he added. “We have over one million unique views per month on the website, and three quarters of that is from the Chinese using our website to plan their shopping trips; they can go through the different brands, the locations, and actually create an itinerary they can print out or save.”
Global Blue also runs a China-focused social media department. “What we have found is that word of mouth is stronger than an authority telling them something. So we work with our bloggers in China to follow the trends and watch what’s going on.”
Is the UK missing a trick?
In recent years, international spending by Chinese tourists has become crucial, not only to the balance sheets of luxury’s biggest players, but to the overall health of Europe's national economies, as well. But not all countries are benefiting equally.
While 82 percent of Chinese visitors to Europe get a Schengen visa, which allows them to access twenty six different countries, including France and Italy, only seven percent of Chinese travellers bother getting the additional visa required for entry into the UK, said Clark. "If you look at Paris, to give you an example, last year they had over one million Schengen visas issued, so one million Chinese visitors to Paris, versus the 174,000 we believe came to the UK last year. Can you imagine the difference to the UK economy?”
Ward echoed Clark’s sentiments: “We have campaigned for simplifying visa requirements to enter the UK, which has been a major barrier to Chinese visitors. We recognise the issues the UK government faces over joining the Schengen group of countries, but we would still like to find a way to see greater access granted for our Chinese visitors, not just for benefits to the luxury industry, but for the British economy as a whole. Paris is seeing ten times more Chinese visitors than London, representing a big missed opportunity for us.”
Average spend amongst Chinese tourists on the Avenue Montaigne, in Paris, hovers around $2200, about $600 less than London’s Bond Street. But in 2012, France welcomed 25 percent more Chinese tourists than the UK. What's more, the rate of growth in overall tax-free shopping in London, last year, was 31 percent; meanwhile Milan and Paris, whose national governments are both signatories to the Schengen agreement, saw growth of 77 percent and 56 percent respectively, according to numbers supplied by Global Blue.
"What we are asking the UK government for is to work with tour operators to almost get to the stage of having one location where you can apply for both a UK and Schengen at the same time… which will then make it more appealing for these Chinese travellers to actually apply for both visas rather than apply for one,” said Clark.
After persistent lobbying by the UK China Visa Alliance — a group which represents retailers, tour operators and tourism leaders, and includes Harrods, Selfridges and the UK division of Global Blue — the British government seems ready to act.
On the 28th of September, Theresa May, Britain's home secretary, told the Financial Times: "We are not going to join Schengen [but] we're looking at the process of application for our visas and for the Schengen country visas in China to see if there's more that we can do to streamline those processes for people.”
But the impact on British retailers aiming to capitalise on Chinese tourist spend, and the golden opportunities that Golden Week in particular represents, remains to be seen.