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Luxury retailers in pursuit of international shoppers

Luxury retailers and trade bodies are working together to woo affluent overseas shoppers by introducing a raft of initiatives to encourage tourism in the UK and get tills ringing.

The luxury sector has long been aware of the growth potential presented by markets such as China and India, where economies continue to strengthen and average wealth per person is rocketing. However, a complex UK visa application process and insufficient marketing of the

UK have led to a loss in potential revenue as tourists stick with less bureaucratic European options such as Paris or Milan.

The figures cannot be ignored. Spend in the UK by Chinese shoppers grew 36% between June 2009 and June 2010, with luxury shoppers spending an average £879 per transaction, according to research by financial services company Global Blue. Meanwhile the number of Indian shoppers spending in luxury fashion stores rose 89% over the same period and they are expected to increase their average spend per transaction - which currently stands at £444 - by 5% to 10% over the next 12 months.

This month, the New West End Company (NWEC), the body which represents retailers in London’s West End, launched London Luxury, a marketing campaign to internationally promote the 300 luxury stores situated around the capital’s luxury quarter in the Bond Street area.

NWEC’s London Luxury committee is formed of representatives from retailers including Selfridges, Mulberry and Burberry and some of the capital’s luxury hotels, such as The Cumberland and The Ritz, and will promote the area through shopping tourism packages and a proposed regeneration programme.

Separately, London’s largest shopping centre, Westfield London, last week joined forces with hotel Intercontinental London Park Lane to showcase brands from its luxury area, called The Village, to wealthy Arab visitors. Retailers including Mulberry, Myla and Wolford will sell products in the hotel for a month until the start of Islamic festival Ramadan on August 11.

The London Luxury campaign will also target Middle Eastern visitors but has a particular focus on China, which is thought to present the biggest potential growth area for the UK in terms of luxury spend by tourists over the next five years.

Harrods managing director Michael Ward said China was the most important and fastest-growing market for the luxury department store. “Spend from Chinese tourism is up about 130% year on year at Harrods,” he said.

However, Ward said revenue was being lost to other European countries due to visa restrictions. The UK is not part of the Schengen region - a zone that covers 15 European countries including France, Italy and Spain, and which requires just one visa to visit. Tourists visiting the UK must apply for a separate visa.

Guy Salter, deputy chairman of luxury trade body Walpole, whose members include Mulberry and Liberty, said: “The Schengen visa requires tourists to fill out a four-page form and lasts 90 days, whereas a UK visa involves a 10-page form and lasts 30 days.” Walpole is pushing for a meeting with the Government’s secretary for business Vince Cable to lobby for restrictions to be relaxed.

“We’ve done research that shows London is consistently in the top five countries that Chinese tourists want to visit but few of them make it,” said Salter, while Ward added that last year, 2 million Chinese tourists visited the Schengen region but only 110,000 made it to the UK.

The New West End Company travelled to the Arabian Travel Market trade show in Dubai in May to promote shopping tourism packages and is planning a similar trip to the Guilin International Tourism Expo in China in September.

NWEC chief executive Richard Dickinson said: “We’ve plotted a calendar of the key periods when tourists are likely to spend in the UK, such as pre-Ramadan when we expect about £2m to be spent in the London luxury quarter.”

The London Luxury committee is working with landlords Grosvenor, Great Portland Estates and The Crown Estate to renovate the quarter. “We’re looking into pedestrianising more areas, or reducing the carriage width as they did at Oxford Circus,” said Dickinson. “We also want to create clearer themes so we can market retailers more effectively. For example, the area where New Bond Street meets Oxford Street we are thinking of rebranding as the menswear zone.”

George McNeil, managing director, retail, of luxury British knitwear retailer and brand Johnstons of Elgin, said Chinese and Middle Eastern tourists would become more important. “European tourists have taken advantage of the weak sterling but as it strengthens we’ll lose that and we need to reach these emerging markets.”

And while most British luxury brands are keen to cash in on initiatives to attract wealthy visitors to the UK, they are also stepping up efforts to take their quintessentially British product to these same shoppers on their home turf.

McNeil said China was a key target for wholesale expansion. “The last thing these shoppers want is ‘Made in China’ products.”

Last week, luxury retailer Burberry signed a £7m deal to take full control of 50 Chinese stores from its licensees in recognition of the growth potential in the area. Chief executive Angela Ahrendts said: “We plan to drive productivity in existing stores and open new stores… in this high-growth luxury region.”

Harrods has also been rumoured to be scouting for a site in China. Ward said: “It would definitely be profitable because there are lots of wealthy individuals there, but we’d need to do a lot of work into how the brand would be perceived there.”

While luxury retailers are yet to fully capitalise on the growth in shopping power from consumers in emerging markets, they have fired the starting gun on what should be a promising push for the sector.

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