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When it comes to the market for luxury goods, “China is the rising star,” according to Claudia D’Arpizio, a Milan-based partner with Bain & Co., the consultancy. Luxury sales in China currently represent 10% of the global market. CLSA, a leading Asian investment bank, estimates that by 2020, China will be the largest domestic market for luxury goods in the world and will account for 44% of global demand. Consumption by Chinese consumers abroad has helped fuel this growth in more mature markets in Europe. CLSA and other firms estimate that currently more than half of Chinese luxury spending occurs overseas. Some Chinese tour groups travel to France and Italy for the sole purpose of luxury shopping.
“After decades of deprivation and conformism, Chinese consumers regard expensive consumer goods as trophies of success,” reported The Economist magazine. “In public, they show off. In private, they pinch pennies.” The demand for luxury goods has increased for a number of reasons which include a rapidly expanding disposable income, the increasing sophistication of Chinese consumers, and rapid urbanisation along with growing wealth in second- and third-tier cities.
Still, the typical Chinese luxury consumer differs greatly from their counterparts in more mature luxury markets. Luxury items in China are generally purchased as status symbols and not necessarily because of taste, sophistication or service. CLSA estimated that in 2010, 16% to 17% of Chinese consumers bought luxury goods as gifts, with handbags, clothing, watches and jewellery being the most popular. Within the accessories segment, 37% of purchases were made for gifts, a far greater proportion than in other markets, with only the newest and most expensive products being acceptable.
According to a recent article in the Hurun Report (a Chinese publication similar to Forbes), the average Chinese millionaires are 15 years younger than their counterparts in other parts of the world, and their number has been rapidly increasing to nearly one million in 2010. Finally, China’s luxury goods market was previously dominated by men, due to the importance of the gift-giving culture in business. As more women have entered the workforce, the proportion of luxury goods they purchase has risen to more than half the market total.
Why Chinese Consumers Shop Abroad
Despite the increase in Chinese luxury goods consumption, luxury brand boutiques in China attract much less traffic than managers would like. Compared to the crowded Apple store next door, Louis Vuitton’s (LV) flagship in Shanghai is empty. More and more, Chinese luxury consumers are choosing to do their luxury shopping abroad. In recent studies, Bain found that more than 50% of luxury goods purchased by Chinese consumers in 2010 were made overseas. A study by PATA/Nielsen found the average Chinese tourist in Europe purchases US$1,359 of goods per trip – more than any other nationality.
This is especially striking considering that most economists believe the renminbi is significantly undervalued. According to Xiao Qianhui, general manager of the Shanghai-based Spring International Travel Agency, most Chinese tourists consider shopping for luxury goods the main purpose of a trip to France. “Sometimes one Chinese tourist will even buy up to 20 Louis Vuitton bags at one shop,” he said. A recent survey commissioned by travel service company Global Blue found that many Chinese tourists complained about not being able to spend everything they had planned to when they were abroad.
The main reasons Chinese consumers cite for shopping abroad are lower prices due to China’s high luxury taxes, better selection and greater “show-off” value. China’s import tax for luxury items ranges from 20% for luxury bags to 50% for cosmetics, which, when combined with additional local taxes such as the 17% value-added tax, leads to a significant premium on these goods. Accordingly, the prices of LV products sold in Shanghai are about 35% higher than those sold in Paris. The Chinese government is considering reducing luxury tariffs on the mainland to spur domestic consumption, seen as necessary to reduce China’s dependence on exports. In the meantime, China has sought to address this price differential by more strictly enforcing existing legislation that imposes retroactive taxes on luxury purchases made outside China. However, the country still loses billions in U.S. dollars annually on uncollected customs duties.
Chinese consumers also prefer to shop outside China due to a perception of greater brand availability and better product selection. Interviews with shoppers at Beijing’s China World Mall, which houses popular luxury brands such as Louis Vuitton, Hermes and Gucci, showed that many female shoppers prefer to shop abroad because they believe the same store abroad will carry, not only a broader range of products, but also newer products. Many Chinese also believe that the luxury shopping experience is better abroad due to superior customer service and a greater selection of brands, including many not yet available in China, such as Alexander Wang and Christian Louboutin. However, LV stated that it offers the same product selection regardless of location. In interviews, an LV executive noted that products offered in China are the same, and only the quantities stocked are adjusted for the Chinese market. Despite the uniform product offerings, Chinese consumers still believe the selections in Chinese stores are inferior to those of stores abroad.
Finally, travelling has become part of the luxury lifestyle in China and is considered a status symbol: there is greater prestige in being able to say you purchased your bag at the place of origin in Paris rather than at a branch in Tianjin. The Chinese National Tourism Administration noted that in 2010, more than 57 million Chinese travelled abroad and spent US$48 billion at overseas destinations, a figure that is expected to grow 17% annually over the next decade. Key forces behind this growth include increasingly convenient transnational payment methods and a stronger Chinese currency, which have made outbound tourism and associated overseas purchasing easier and cheaper. In particular, with the resources to travel overseas, many newly rich Chinese are eager to show off their wealth through high-value consumption.
The Appeal of Louis Vuitton
Louis Vuitton, in particular, is a favourite shopping destination for Chinese abroad. In fact, Chinese consumers have become LV’s largest consumer group worldwide. While this influx of demand has been a welcome growth stimulus for LV Europe, it has also presented its own unique challenges.
At LV’s more well-known locations, such as those at Galeries Lafayette and Avenue des Champs-Elysées in Paris, it is not uncommon to find queues of more than 20 tourists from China waiting to purchase merchandise. This number swells dramatically with changing exchange rates, which, when combined with Chinese consumers’ different shopping habits, have led to significant challenges for LV Europe in managing inventory. In the summer of 2010, when the renminbi was at its strongest against the euro, LV France burned through three months of inventory in just one month. As a result, through the end of November, LV was forced to limit to two the number of leather goods customers could purchase daily so that the store could save stock for the Christmas season. Several key Paris locations, including LV’s flagship, began closing an hour early to slow sales.
In addition to their numbers, the shopping habits of this large new consumer group differ greatly from those of LV’s traditional customers. More than 95% of Chinese tourists arrive on tour buses, leading to a quick spike in customer volume and posing a challenge for staff charged with providing premium service to each individual shopper. Also, while LV has traditionally posted its strongest sales during the fourth-quarter Christmas shopping season, the increase in Chinese consumers shopping abroad has caused sales to shift heavily toward the weeks leading up to the Chinese new year in late January or early February, resulting in a massive spike in sales in the first quarter. This has created challenges to LV as it tries to manage the supply-chain implications of a shift in seasonality.
Blistering Chinese demand, combined with factors such as purchasing limits and the high luxury tax at home, has also led to the growth of a large grey market for LV products. Managers at LV’s Galeries Lafayette location were recently dismayed to learn that the two young Chinese women who held the top two spots on their VIP list, each spending more than €500,000 (US$700,000) per year, were selling them at a profit on Taobao.com, China’s version of eBay.
Quite naturally, the droves of Chinese shoppers who purchase LV products overseas are of concern to LV China. LV China wants China’s new luxury consumers to shop at home, not only to increase domestic revenues, but also because the company feels it can better control its “touch” in the home market: having more Chinese staff with a better understanding of how best to serve Chinese shoppers makes LV better equipped to shape the customer experience it wants its Chinese customers to have.
In the meantime, LV has moved quickly to adapt to, and better serve, this growing customer segment. At its Paris locations, Chinese shoppers can find numerous Chinese-speaking staff, all of whom have been trained to better meet Chinese needs and better handle the spikes of tour-bus traffic. According to July Azoulay, marketing manager of LV, the LV flagship located on the Champs-Elysées hired multilingual (Chinese and Russian speaking) staff to meet and greet its clients.
At home, LV China has developed innovative ways to strengthen its relationship with this high-priority customer group. In Shanghai, three stores exemplify LV’s customer segmentation and targeting strategy: the LV flagship on bustling Huaihai Road attracts young, aspiring buyers and prominently displays lower-priced “accessible luxury” items. Across the river in Pudong, LV’s location in the main business and financial district has a “more masculine décor,” as described by some LV employees, and caters more directly to businessmen shopping for gifts. In Plaza 66, Shanghai’s premier luxury shopping mall, LV is building its largest store worldwide, a Maison store, focused on educating shoppers. It will feature the first LV atelier [workshop] outside France, providing an ultra-premium shopping experience where craftsmen from Europe will demonstrate the traditional methods used to create LV trunks, watches and bags. In 2011, in addition to experiencing LV in stores, people in Beijing queued for hours to learn about the history and evolution of the brand at LV’s Louis Vuitton Voyages exhibit at the National Museum of China.
Other initiatives LV has taken to strengthen its relationship with Chinese consumers at home include investing heavily in staff training to provide customers with a premium shopping experience and demonstrating its commitment to its Chinese customers through a new advertising campaign featuring the Taiwanese-Canadian model Godfrey Gao – the first time LV has used an Asian male to showcase its products.
Going forward, LV and other similar luxury retailers need to continue to focus on their ability to connect with customers in China. LV’s segmentation strategy in its brick-and-mortar stores in cities such as Beijing and Shanghai is a good start. For those customers already shopping abroad, LV would benefit from sharing customer data across regions so that a VIP shopper in Europe is recognised when he or she enters a local LV store in China.
LV can further strengthen its ability to connect with young Chinese shoppers via its online marketing efforts. Just as luxury brands in China generally have chosen not to tailor their products or store designs drastically to the local market so as to preserve the perceived authenticity of the brand, they generally have not tailored their online presence to better suit this new media market. However, the role of the Internet is far more important in the young Chinese consumer’s shopping process than it is in other markets.
A study by Bain found that the number of Chinese consumers who rely on the Internet, especially social media such as bbs forums and micro-blogging, as a means of researching luxury goods and brands has increased by 30% since 2006. In addition to learning LV’s history and brand message, young Chinese shoppers want to know how to use and wear the latest styles and to discuss trends with their peers. Incorporating the educational and interactive components of LV’s Maison stores into its websites, e.g. through a well-designed style guide, can help LV connect with and influence customers earlier in the purchasing process. Simple directions as to where these items can be purchased locally will also help mitigate the misperceptions of inferior selection and older products at home.
The number of Chinese travelling and shopping abroad will only continue to grow, and LV’s global operations should continue to adapt accordingly. With the increasingly competitive luxury market in China, LV China will need to work harder to maintain and grow market share by winning the loyalty of new waves of young Chinese luxury consumers.
This article was written by Jane Fung, Charlotte MacAusland and Grace Chang Mazza, members of the Lauder Class of 2013 and taken from http://knowledge.wharton.upenn.edu/article.cfm?articleid=2901
Scoot is Asia’s newest long-haul budget airline and has chosen Singapore to Sydney as its first international route, starting daily from mid-2012 and helping to add AU$146 million a year to New South Wales’s economy.
Barry O’Farrell, Premier of New South Wales said of the announcement: “This is a great win for Sydney and travellers in the Asia-Pacific region, opening up Australia’s largest city to more international routes and lower-cost carriers.” He went onto say: “This places Sydney front and centre of the boom in budget travel in emerging markets like Singapore, China and India.”
New South Wales’s minister for Tourism, George Souris expanded by stating: “Scoot’s arrival gives tourists from the growing markets of China and India more choice on how to get here and enjoy the many attractions and major events we have on offer in Sydney and New South Wales.” New South Wales have a 2020 target of doubling overnight visitor expenditure.
This exciting announcement, and the two-year marketing plan Destination NSW, Tourism Australia, Sydney Airport and Scoot plan to run following the launch of the route will hopefully help New South Wales achieve this goal.
To read the full article, go to http://www.spicenews.com.au/2011/12/01/article/New-Asian-long-haul-budget-airline-chooses-Sydney/WJOCVSDSVX.html
15th December marked the beginning of a month-long global campaign run by the Tourism Authority of Thailand (TAT) and the Thai Hotels Association (THA) to encourage tourists to return to the area following the floods that ravaged parts of the country from July to December. Most three and four star hotels that are members of the THA are expected to take part, where they will offer ‘buy one get one free’ deals on normal room rates from 15th December until 15th January 2012. This should encourage many tourists to hurry back to the country at a time which is normally high season.
The organisation will be promoting the offer worldwide from their 26 offices, but will focus on countries close-by such as Hong Kong, Singapore and China, and hope that the campaign will boost tourism by up to 30%. This estimation will assist in the huge losses that hotels experienced during the floods which took away more than an estimated 400,000 tourists from the country. TAT reported that although almost all tourist destinations were not directly affected, visitors may still avoid travelling to Thailand and they have estimated a drop of around 300,000 people.
TAT organised a “mega-familiarisation” trip which brought around 500 travel agents and media representatives from all over the globe to Thailand, and will be adding further marketing activities in January and March to increase visitor figures again. TAT are confident that by the end of March 2012, the sector will have fully recovered and hope that this marketing campaign will help them on their way.
Read the full article at http://www.phuketgazette.net/archives/articles/2011/article11565.html
On October 11, the Tirol Tourist Board and their partners Bayern Tourism Board, Innsbruck Tourism, Air China and Munich Airport held an event in order to promote the region of Tirol, in the heart of the Austrian Alps.
Over 45 guests attended the event, representing Chinese tour operators, Austrian local travel agencies, the German and Austrian Tourism Boards.
Astronaut assisted in organising the event in Beijing, ensuring that it was a success.
www.tyrol.com
On October 25, Visitbrussels, in collaboration with Wallonie-Bruxelles Tourism, Leon Restaurant, Magritte Museum and Brussels Centre for Fashion and Design, held a breakfast meeting in Beijing to promote Brussels as a business, conference, meeting and tourist destination.
Held at Beijing International Trade Hotel, 30 guests from all Beijing’s major travel agencies and 7 representatives from the media were welcomed to the meeting, which was themed “Belgium: one country, three regions”, by Belgian ministers Benoit Cerexhe and Van Raes. In their speeches, the two ministers outlined Belgium and its capital city, Brussels, and highlighted their hope that Brussels would become the next hot destination for Chinese tourists.
Astronaut assisted Visitbrussels and its partners with the organisation of the event. They invited targeted guests, produced promotional materials such as translated brochures, created business cards for the hosts and ensured the entire event was on-brand.
One of the places tourists can visit on the Buddhist Train (www.buddhisttrain.com)
China’s outbound tourist numbers are growing at an exponential rate with travellers flying all over the world for shopping, safaris and health treatments. But when it comes to India, only about 102,000 Chinese people travel there – less than 0.21 per cent of the total number going abroad. This is a tiny share of the massive $40 billion that is spent overseas each year by Chinese tourists.
India Tourism are getting spiritual to help them succeed in the future by launching a campaign which targets China’s fast-growing Buddhist population and asking them to ‘visit India and reconnect with your faith’.
The ‘Buddhist Circuit Train‘ stops along several pilgrimage sites in northern India and has been open since 2007. Over the course of a week it takes travellers to a number of cities related to Buddha’s life from New Delhi to Nepal, where Buddha was born. India Tourism and the Indian Railway Catering and Tourism Corporation (ITRCT) are promoting this to Chinese Buddhists as a way to reconnect with their faith in comfort, and hope that it will help the dwindling tourist numbers. Since there are up to 200 million followers of Buddhism in China, if even a small percentage of this number travel to India, it would boost tourist figures dramatically.
The campaign launched in China on Monday with Rakesh Tandon, managing director of the IRCTC addressing a number of Chinese tour operators and travel agents. Mr Tandon assured the audience trains would be “safe and fully air-conditioned”, hoping to put potential travellers minds at ease about the idea of going to India – two of the biggest concerns are lack of safety and the climate. “India is blessed to have a lot of pilgrimage sites connected with Buddha’s life,” and India Tourism hope that they will be blessed with a bigger chunk of Chinese travellers following this campaign.
Original article at: http://www.thehindu.com/news/international/article2650921.ece
Privacy and quality are two key factors that are attracting more and more of China’s wealthy to travel to other countries in search of healthcare services, so say experts in the medical tourism industry.
China’s economy is booming among a multitude of those that are struggling so the increasing numbers of Chinese citizens benefitting from this growth is increasing greatly, which can help drive the medical tourism industry.
Around 60,000 of the annual outbound visits from China are for healthcare services which is an exponential rise compared to five years ago when this figure was just a few thousand. Travellers favour destinations such as Hong Kong, Japan, Singapore, South Korea and the US, and travel for treatments such as anti-ageing therapy, cancer screening and to give birth.
Located in a luxury hospital in Singapore, Parkway Pantai Limited is a private healthcare provider which has seen the potential of China’s inbound medical tourists and is set to open next year for both Singaporeans and those from other countries. Dr Tan See Leng, CEO, said of China: “Given the sheer population size and evident ageing trend, China’s definitely of great market value for the medical business.”
In order to make visitors as comfortable as possible, many hospitals which receive Chinese patients have Chinese-speaking staff as well as offering visa and travel assistance and in-country help centres for potential patients. These offers help to attract customers where language can be a preventative barrier to travelling.
One of the other deterrents is cost. Even for the most well off in China, lack of private medical healthcare can mean a short stay for a simple procedure can cost hundreds of thousands of yuan. Although this price is becoming possible for more and more people, so it looks like the medical tourism vehicle is just starting to gain speed.
The increase in outbound tourists from economically thriving countries such as China, India and Brazil could potentially bring visited countries well-needed income and create jobs in a whole range of industries. So why is it that during the past ten years the US, one of the world’s most desired travel destinations, has been losing market share to other countries, such as France (who captured 18% more Chinese visitors than the US in 2010)?
One of the biggest deterrents for tourists wishing to travel to America is the frustratingly-long visa application time which can be 100 days or more for some applications. Patricia Rojas, Vice President of government affairs for the US Travel Association (USTA), said of visa problems: “Unfortunately we’ve had significant barriers to travel, because of delays and customer service concerns about the visa process, leading to the inability of travellers to get a visa in a timely basis. Between 2000 and 2010, there was extensive growth in the (overseas) travel market, but the US was stagnant, and our share of the market actually dropped.”
As well as the long processing time, due to the necessity that each applicant takes part in an interview to obtain a visa, before a traveller has even left China they could be required to spend a considerable amount of time and money travelling to one of the country’s only six consular offices for their in-person meeting.
And the problems don’t stop there – inbound travellers’ welcome by US customs could be improved as well. Rojas commented: “We’ve had visitors get off an eight-hour flight, then wait 60 to 90 minutes to be processed, and that’s not the first impression we want to give them of the United States. Friendly and efficient processing of visitors needs to happen at our international airports.”
So, what can be done to halt this downward turn? The US have recognised these problems, and new legislation, such as the Welcoming Business Travellers and Tourists to America Act of 2011, which addresses inefficiencies in the visa processing system and will encourage maintaining a 12-day processing time and pilot visa interviews conducted via videoconferencing; the International Tourism Facilitation Act, a bill to make changes to the procedures relating to the issuance of visas, and amendments to the State Department Operations Bill should help towards the US making the most of their inbound tourist potential.
Growth has already been observed in the larger gateway cities such as LA (16%), New York (10%) and Miami (11%), and following income created by the 2010 Travel Promotion Act, the US’s first global brand, Brand USA, launched on Monday announcing that their first advertising and marketing campaign will be released in spring 2012, aimed at encouraging travellers from all over the world to visit the US.
The USTA hope that these campaigns, along with well-needed visa procedural changes, will encourage Chinese and other travellers to keep America near the top their travel wish-list.
Amended from original article at http://www.hotelnewsnow.com/Articles.aspx/6876/US-struggles-to-attract-international-guests
From among a variety of agencies Astronaut Travel was chosen to represent the Polish Tourist Organisation in China until the end of 2012.
Astronaut Travel has won the open tender to be the Polish Tourist Organisation to implement publicity measures in the Chinese market, taking over the PTO’s online promotions, PR, events and fam trips to Poland.
Starting from July this year, Astronaut will represent the PTO at events in key cities in China, running promotional campaigns from its headquarters in Beijing as well as its second office in Shanghai.
Previously promotions were organized directly by the Tourist Organisation, operating from Warsaw. The official PTO office in Beijing is better positioned to operate in the Chinese market, and will provide services in Chinese, Polish, and English.
Polish Tourist Organisation
Beijing Office
Online Communications Assistant at Astronaut
China Outbound Tourism News 