Serving China’s Global Luxury Consumer No Small Task

March 1, 2014/0/0
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Fueled by a stronger yuan, high prices at domestic stores, greater ease of travel, and China’s ongoing anti-extravagance campaign, more Chinese than ever headed abroad in 2013—most of whom had their sights set on luxury shopping. Last year, Chinese shoppers accounted for over one-third of all luxury purchases in Western Europe, dedicating 33 percent of their travel budget to shopping alone (compared to 11 percent for the French). Chinese tourists have already surpassed German tourists as the world’s top spenders.

They may have already made their presence felt, but Chinese outbound tourist-shoppers today represent only the tip of the iceberg. Currently, only about 5 percent of all Chinese nationals hold a passport, indicating that brands have only just begun to see the importance of this demographic. CLSA recently predicted that the total number of outbound trips from China will double by 2020 and spending will triple. In particular, trips to the United States are expected to triple by 2020. As Catherine Yeung of Fidelity recently told the Financial Times, “Perhaps China’s largest export in years to come is going to be the Chinese tourist.”

However, brands from Milan to Miami, London to Los Angeles now realize that attracting China’s burgeoning globetrotter is no longer as simple as opening their doors, slapping some Chinese-language signage on the wall, and perhaps hiring a Mandarin speaker or two. The Chinese outbound traveler has proven to be a highly diverse demographic, and demands far more from his or her overseas travel experience. Although the days of the tour bus pulling up in front of the mall or boutique to deposit a couple dozen rabid shoppers may not be exactly be gone, these days are numbered. A rising number of independent travelers represents an unmissable opportunity for brands, as well as a massive challenge.

According to a new report by Jing Daily and China Luxury Advisors, luxury brands can’t afford to underestimate or misread the opportunity presented by Chinese outbound luxury consumers. The report, “Serving the Global Chinese Customer,” notes that Chinese consumers currently make more than 60 percent of their luxury purchases overseas, representing more than US$28.3 billion in sales. This number is expected to grow by 31 percent, four times the rate of growth in China’s domestic market (a more modest 7 percent).

Yet, the report notes, winning over Chinese consumers requires looking at the China consumer opportunity on a global basis, not country by country. For luxury brands, investing in China is not just a single-market decision, it should have a clear strategic vision, led from the top of the organization and executed by coordinated teams in China and around the world.

According to Sage Brennan of China Luxury Advisors, “Now more than ever, it’s clear that luxury brands need to think globally and act locally when facing Chinese consumers. Gone are the days of easy money for major brands—they’ve got to set themselves up to understand and engage Chinese consumers, in all their forms, over the long haul.”

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