Companies Adapted to Capture Chinese Luxury Shoppers

Chinese luxury shoppers

By Lotus Ruan

Chinese consumers have long been a strong force for luxury purchases. Chinese tourists, in particular, account for a sizable portion of global luxury goods consumption.

Just recently, over 6 million Chinese tourists traveled overseas during the eight-day National Day and Mid-Autumn Festival holiday. And instead of looking for travel guides, they enthusiastically sought shopping guides.

Becca Li, one of the most popular fashion bloggers in China, said there was a high demand from her readers for tips on which luxury handbags, watches, and skin care products to buy at the airport.

As a response, luxury brands have taken various steps to drive sales from Chinese travelers.

Easing of cross-border payment

Statistics show that over 90 percent of Chinese millennials prefer mobile payment. Brands are therefore increasingly partnering with fintech companies to provide Chinese-tailored payment solutions.

For example, British luxury department store Harrods has over 1,000 POS devices that accept Chinese bank cards, making luxury shopping easier for Chinese travelers. Luxury realtor DFS Group just announced that it now accepts WeChat Pay at DFS, San Francisco International Airport and T Galleria by DFS in Hawaii.

The trend is spreading even faster closer to home. In Japan, which is one of the top travel destinations for Chinese short-term outbound tourism, WeChat Pay is becoming more and more acceptable in most places such as national retailer Mega Don Quijote, Daimaru Matsuzakaya, and stores at Tokyo Haneda Airport. The number of purchases made via WeChat in June was 16 times more than in January this year.

Stress-free pre-order pickup at the airport

The momentum of digital transformation is calling for changes in both travel and luxury industries. As Bain & Company predicts, online sales is set to be the “leading channel with the highest growth in the coming years.”

Rather than focusing on the platform where transactions take place, retailers such as Korea’s Lotte Duty Free and Germany’s Munich Airport Shop are trying to redefine travelers’ shopping experience overseas. The retailers allow travelers to per-order duty free luxury goods between 24 hours and one month before their trip and simply pick them up at the airport of their destination.

Italy-based multinational travel retailer World Duty Free has launched pre-order and pickup services for tax-free luxury goods from brands such as Bally, Fendi, Longines, and Mont Blanc earlier this year. Perhaps in an effort to reach more Chinese consumers, it has provided a detailed guide in Chinese on its official website and social media channels.

Chinese-tailored shopping experience

Some luxury brands have a more straightforward way to attract wealthy Chinese tourists: establishing a close relationship with Chinese-speaking tour guides via commissions.

Chinese travelers are one of the most lavish spenders of all inbound tourists in the UK. In 2016, they spent more than US$670 million (most of which was spent on luxury goods), doubling the figure in 2011. According to Financial Times, commissioning has become a common way for UK-based luxury brands to lure Chinese tourists. It has also become common that mobile apps and maps are available in Chinese to help navigate the Chinese around luxury retailers in a city.

Despite potential legal issues on paying and taking kickbacks, managers of luxury stores acknowledged that they “have to be open-minded [about]how we target the Chinese.” London-based luxury retailer House of Hanover, for example, says it depends almost entirely on sales from Chinese and Korean tour guides. Additionally, many luxury retailers are hiring more and more Chinese-speaking sales agents to accommodate Chinese visitors.

Over 40 percent of Chinese consumers’ luxury purchases were made overseas. According to Bain & Company, the global luxury market is set to rebound again, thanks to an expected resurgence in Chinese tourists visiting Europe.

Although more and more Chinese consumers are turning to their home base for luxury purchases due to lower prices, they are still expected to spend over US$255 billion abroad by 2025. It is also predicted that China’s outbound tourism boom will continue to dominate the global travel market for another 10 years.

But competing with China’s increasingly mature domestic luxury ecommerce platforms and bettering the shopping experience for Chinese travelers remain challenging for luxury brands.