The influx of wealthy overseas tourists is causing luxury retailers to rethink their offering.
The news last week that Harvey Nichols is introducing more ‘classic’ luxury brands such as Chanel and Christian Dior to its historically more trend-led offer spotlighted the measures retailers are increasingly having to adopt to attract wealthy shoppers from overseas.
But how does catering for the different tastes of Brazil, Russia, India and China (BRIC) consumers impact on stores such as Liberty, Harrods and Selfridges? And how will it shape the ranges they choose to stock in future?
According to tax-free shopping company Global Blue, retail sales to Chinese consumers rose 64% for the year to December 2011, with the average spend being £679. Focus on London’s West End alone and that figure rises to £1,317. It’s a pattern that is reflected in the numbers for consumers from other emerging markets too (see table). With the pound weak, tax-free shopping a lure and the Olympics on the way, it’s a trend that is unlikely to slow down any time soon.
According to New West End Company, which represents retailers in Bond Street, Oxford Street and Regent Street and 12 neighbouring streets, of the annual £7.5bn spend in the West End, it is the MERC markets [Middle East, Russia and China] that are the biggest drivers of international luxury spend.
China is the biggest growth market, with sales in the West End increasing 59% year on year, and is nearly double the average spend of Chinese tourists throughout the rest of the UK (£705). Russian visitors’ spending in the West End has risen 12% year on year, with a 15% increase in sales to Middle Eastern shoppers.
Marigay McKee, chief merchant at Harrods, is conscious of the need to reflect the differing tastes of overseas consumers in the product it stocks. Total sales grew 12% last year, a feat she puts down, in no small part, to a marked shift towards international designerwear, with high price points for super-brands such as Chanel, Dior, Prada, Gucci and Louis Vuitton. An average spend of £3,500 by Chinese shoppers over Christmas 2010 helped the luxury department store hit the £1bn sales mark. Harrods now wants to double this within the next five years.
Indeed, according to insight from Global Blue, while Brazilian shoppers head to the UK for fashion it sees as more youthful and edgy than they can get at home, Chinese and Russians want status brands. Chinese shoppers choose to buy 80% of their luxury purchases abroad to avoid fake goods, and favour accessories. For the Russians, it’s all about service.
Understanding and adapting to these cultural differences is something retail analyst Patrick Woodall from retail consultancy Pragma says should already be second nature to luxury retailers, especially in London.
“In my view, for those businesses it’s like asking, ‘Do you need an ecommerce offer? Absolutely, because that’s the way the market is going. BRIC consumers have astounding purchasing power. But because it is recent wealth, those people want to spend on these very, very recognised global luxury brands.”
With the Olympics fast approaching, London is set to become more of an international hub than ever before. Liberty’s eyes are firmly on the prize, with a new store just opened close to the Olympic stadium at Westfield Stratford City. In tune with its brand image and heritage, the store is a treasure trove of Britishness – ‘Queen’s guards’ in full regalia flank the entrance while the window has been decorated to resemble a traditional British seaside scene.
While Harvey Nichols’ approach includes adjusting its product mix, and for Liberty it is Britishness that strikes a chord, buyers at Selfridges say they are more universal in their approach. Although keen to welcome everybody by striking a balance between mainstream and high-end fashion, the department store has introduced specific services for BRIC consumers, including Chinese language lessons for staff to help them familiarise themselves with Chinese shopping habits and customs.
Sebastian Manes, womenswear, accessories and kidswear buying director at Selfridges, says retaining a clear sense of British identity is key.
He says 75% of its sales still come from domestic consumers, according to tax-free shopping records, a figure likely to be much higher than its rivals.
“We’re proud it’s a high [proportion] and we want to keep it that way,” he says. “It is very important for us to remain truly British. We consider ourselves a local store and think our product mix reflects that well. We are proud to have Topshop and H&M and all those brands – which we’re developing – but we also have a luxury strategy.
That’s not to say the impact of the BRICs is not being felt – Selfridges on Oxford Street has added a size 35 in women’s footwear to a number of lines and is looking to add smaller sizes to some of its ready-to-wear ranges. “It’s more about the sizing and service than anything else,” says Manes.
“That’s one of the biggest things.
We tend to forget cultural resonances in service are very different. The very wealthy make up less than 1% of the Chinese population so they expect to be treated as very special people indeed, for the obvious reason there are very few of them.”
As a result, Harrods officially launched a Chinese-language Android app at the beginning of June. The retailer is using feedback from the app to explore new ways of expanding its Chinese services. It follows continued investment in catering for the Chinese shopper, which has seen the launch of worldwide shipping, tax-free shopping, later summer opening hours, Mandarin-speaking staff and more than 100 Union Pay terminals in-store.
Expect to see the introduction of further initiatives as the wealth, and the desire for luxury brands, among BRIC consumers keeps growing.
Status symbol: globally recognised luxury labels like Christian Dior are sought after by BRIC consumers
Story in numbers
Year-on-year growth in spend by Chinese consumers in the West End
Average spend per transaction for Chinese shoppers in the West End
Year-on-year rise in spend by Russian shoppers in West End
Expected increase in spend from extended Olympic Sunday opening hours in UK
Proportion of that spend set to benefit London
Number of visitors expected in London during the Olympics