The number of Chinese tourists coming to the UK is soaring, and many of them want to splash out on fashion. So how can retailers cash in?.
There were very few Chinese tourists visiting the UK 10 years ago, but by 2020, as Chinese wealth increases and visa rules relax, there are expected to be more tourists visiting the UK from China than from any other country.
According to Nigel Dasler, vice-president of tax-free shopping firm Global Blue UK, the Chinese reserve 70% of their holiday expenditure for spending on goods to take home, compared with between 25% and 30% for US visitors, and fashion is their biggest category for spending.
“Four years ago, retail spend [by Chinese visitors] was £30m or £40m in the UK. Now it is £300m [in the UK] and growing,” he says.
In the first quarter of this year, the average spend per transaction by a Chinese visitor to London was a whopping £1,485 compared with £1,156 by their Middle Eastern counterparts - who have traditionally been London’s biggest-spending tourists.
The figures may swing back for the second quarter, once the Chinese New Year is behind us and Middle Eastern shoppers are preparing for Ramadan. But nonetheless, the message is clear: if you haven’t factored Chinese tourist spend into your retail strategy already, you need to do so, fast.
The Chinese tourist circuit bears testimony to this. Most visitors currently focus on London and Oxford, stopping by off-price shopping centre Bicester Village for at least half a day en route.
Value Retail, which owns Bicester and nine other centres internationally, stole a march on wooing Chinese visitors about six years ago by marketing its centres direct to Chinese consumers under the banner Chic Outlet Shopping Group and visiting tour operators in China to promote them as a tourist destination. Bicester Village is now included on the majority of tour group itineraries and more than 20% of its footfall is from Chinese visitors. At Bicester, tax-free spending by Chinese visitors almost doubled in 2010 compared with the year before.
It helps that 70% to 75% of Chinese visitors to the UK come with organised tours (although this proportion is starting to shift in favour of business and independent visitors) and are in hot pursuit of a bargain.
Jace Tyrrell, spokesman for the New West End Company, (NWEC) which represents retailers on or around Oxford Street, Regent Street and Bond Street, says: “Whereas Middle Eastern visitors tend to like to shop at full price, even very wealthy Chinese shoppers are looking for a discount or some kind of exclusivity. It might make sense for retailers to set their prices so they can factor a discount in, or offer some kind of gift or exclusive experience.”
Home from home
Other London retailers, including Selfridges and Harrods, have hired Mandarin-speaking staff to service Chinese shoppers. In April 2010, Selfridges became the first UK department store to install China UnionPay credit card machines - the Chinese equivalent of Visa. Harrods followed suit in February this year.
Selfridges PR manager Bruno Barba will not say how many transactions its UnionPay machines have handled so far, other than they number “hundreds of thousands”, but adds: “We have also tripled the number of Chinese speakers on our shopfloor over the last three years with the aim to have 20 perfectly fluent, Chinese-speaking staff on the shopfloor at any one time, and are also considering floor plans in Chinese.
According to Dasler, about 90% of China UnionPay cards are co-branded as Visa or MasterCard, so the move to install machines is more about “helping Chinese shoppers to feel comfortable” with their transactions than with actually making it possible for them to spend.
However, China UnionPay (which is actually an association of banks, although it runs a monopoly on electronic transfers in China) is expected to split off as a standalone, international electronic payments operator, at which point China UnionPay machines will become more than just decorative.
For Dasler, all retailers should be learning from the luxury department stores. “I don’t think hiring Mandarin-speaking staff is any more expensive than hiring normal staff these days, and something simple, such as a tasteful ‘welcome’ sign in the window written in Chinese, can also have a big effect,” he says.
“They also need to market themselves. If I were an indie I would contact Visit Britain and NWEC and so on. NWEC has a Chinese-language website that gets half a million hits a month from Chinese visitors alone.”
Value Retail business director Sylvie Freund-Pickavance agrees that service is key, arguing that the traditional stereotype of the Chinese as hyper-efficient, transaction-focused shoppers should not be confused with a lack of concern about customer service.
“Often they don’t speak the language, so they can’t express themselves properly, and because they are on tours they have little time,” she says. “Chinese people that are able to leave China to go on a trip have also done a lot of research, so they have a clear idea of what they want to do and maybe go a little faster, but they still want a high level of service.”
To cater for this, Bicester has a Chinese-language welcoming address for tour parties, explaining what can be bought where and any special promotions, and all food outlets have translated menus.
Other cultural phenomena are less obvious. Freund-Pickavance notes, for example, that the number four is considered unlucky in China because it sounds like death, so promotions based on the number four are likely to go down badly (many Chinese department stores even ‘miss out’ a fourth floor, instead skipping straight from three to five). By contrast, the number eight is considered lucky and can be used to drive sales.
Chinese-language signage, lucky numbers and familiar credit card machines are not the only cultural issues retailers need to tackle, however. They also need to understand what Chinese visitors - and different kinds of Chinese visitors - want to buy.
Most Chinese shoppers want luxury goods and the UK is seen as a reliable place to get them without falling foul of counterfeits. However, whereas first-time Chinese visitors to the UK used to roll off tour buses and queue unglamorously outside the likes of Louis Vuitton for their trophy purchase, the number of Chinese tourists who are making repeat visits to the UK is increasing, and shopping habits are becoming more subtle.
Tyrrell says: “They are becoming more savvy when it comes to the brands they will purchase, and even the items within the brands they purchase. Anyone that has bought a luxury handbag, for example, from a UK brand is more sophisticated in their next purchases. They are looking for things that are unique, but also brands that are uniquely British.”
Stores such as premium London indie Browns Focus have reported a shift of attention and spend towards “younger, edgier designers” that are less showy than some of the bigger-name brands, and are not yet known in China - presenting a major opportunity for independents to get in on the act.
Freund-Pickavance notes that luxury designers like Matthew Williamson and Alexander McQueen perform particularly well, because they are not widely known in China but “appeal to a Chinese sense of style”.
There is also growing scope for mid-market retailers, who may not offer the kind of luxury Chinese shoppers often seek but offer trend-led pieces that are exclusive by dint of being bought in Europe. Even the UK versions of retailers such as Zara and Mango, which have a large presence in China, are seen by more fashionable Chinese as better for trend-led goods than their equivalents at home.
Wherever you sit in the market, this invasion is too big an opportunity to ignore.