Manelik Sfez is Head of Intelligence at Global Blue, he has spoken about the globe shopper at the Magdus 2012 Conference. Global Blue is the expert in international traveller shopping and spending and provides tax refund services, dynamic currency conversion, transaction technologies, research, marketing and consultancy to international luxury brands.
The next wave of high spending tourists will hail from emerging markets in Asia, especially China. Many businesses are looking to these markets to sustain growth in an era of economic uncertainty as tourist shoppers from China, Japan, Indonesia, Taiwan, and Hong Kong combined hold more than 30 percent of the global tax-free spend, according to Global Blue Analytics’ findings. Global Blue has named this group of visitors globe shoppers, because of the high priority they give to shopping.
Asian globe shoppers are increasing their spending in destination cities around the world. This year in Singapore, one of the top five destination countries for tax free shopping sales, Chinese and Indonesians represented 55 percent of globe shopper spending. In the first half of 2012, Chinese tourist shoppers spent an average of SGD1,951 per purchase and Indonesians SGD946 (USD754). Other significant globe shopper nations in Singapore were travellers from Malaysia (7 percent) and Japan (5 percent).
Chinese globe shoppers are now considered the ‘new rich’. According to Global Blue, in FY2011/2012, Chinese shoppers maintained their number one position as the nationality generating the most tax-free shopping sales, spending SGD3.23 billion on tax-free products globally, a 68 percent increase from the same period a year before, placing them ahead of their Russian, Japanese, US and Indonesian counterparts.
This trend of increasing affluence of Asian globe shoppers offers luxury goods retailers rich opportunities for growth and a low threat of competition, but they offer no reason for complacency. Without careful attention to their markets and their target customer groups, some luxury brands may find themselves marginalised and facing tough times.
Brand awareness
One of the main characteristics of these Asian globe shoppers is that they place a high premium on the brand. Knowledge and understanding of a brand’s heritage is highly correlated with a subsequent purchase for these shoppers. Being well known as a brand means making sales, being unfamiliar means no customers. This is backed by Global Blue’s findings that the brand makes up 60 percent of a Chinese globe shopper’s purchase decision.
For some brands that are highly recognisable, or leading in their category, purchasing can over-index against awareness: visitors to the store will purchase brands with which they are not familiar.
Luxury brands such as Rolex, Louis Vuitton and Burberry are desired in emerging markets, just as they are in their home markets. Globe shoppers are increasingly willing to pay for these brands. One telling illustration of this is that the average amount spent on watches and jewelry by the Chinese globe shopper is SGD1,341.
Globe shoppers buy brands that they are intimate with; they will know the origins of the brand, where the products are made, who the designer is and exactly why they prefer it to other brands. The reputations of these brands are based on a long commitment to producing excellence and an extensive history of iconic cultural associations. Unlike, say, mobile phones, consumers are not going to substitute these luxury brands with cheaper local alternatives. This means that for most luxury goods retailers, the brand’s reputation is a strong enough pull for the Asian globe shopper.
In view of this, developing a close relationship with Asian globe shoppers before they travel is essential, as before they leave on their trip they will have settled on what to buy in four out of five cases. Among Chinese visitors, this will be driven by gifts, and by a shopping list provided by friends and family back home. It is not unusual for a Chinese shopper to ask for two, three, or even more of a bag they have picked out.
Tailored service within store
Besides brand awareness, another way to attract the Asian globe shopper is through providing tailored service and holding conversations with them within the store. Only a few top brands attract the attention of international travellers because of their reputation, but as the number of visitors grows, trend setters will tend to seek more exclusivity. More cachet smaller brands will benefit from sharing a more in-depth experience with targeted groups of travellers from emerging markets.
Attracting travellers to the door is only the beginning of the relationship between the brand and the shopper. Like shoppers all over the world globe shoppers have certain expectations of their shopping experience that, if met, will make them happily spend money at a store, today and in the future. They will have carefully planned their trip many months and come to stores expecting to receive outstanding service, better value, assured quality and have a greater range of choice.
However, around 70% of shoppers return home disappointed, claiming that they were unable to spend all their money. Creating a shopping experience that meets their expectations depends on a merchant having a thorough understanding of globe shoppers.
For example, three-quarters of Chinese shoppers expect to be offered a discount of some kind, if this expectation isn’t met disappointment follows. The discount can take the form of a price reduction, a gift, or even loyalty card points; it is likely they will be back. Simple steps to enhancing the experience include accepting their preferred payment card and allowing payment in their own currency. However, to ensure a satisfied customer a well trained assistant must know everything about a product and its availability and demonstrate a subtle understanding of the shoppers’ culture by identifying key decision makers in a group and understanding shopping norms such as touching and bartering. It goes without saying that speaking their language is essential.
Intimate understanding of the Asian globe shopper is essential
Global Blue has been working with luxury goods merchants and international travellers for more than 30 years, helping to improve the relationship for both sides. We have seen the progress this group of Asian globe shoppers has made in the past few years and the extent of their growth is phenomenal. Overall spending by Chinese travellers on luxury goods has more than doubled in the past two years to an average of SGD1,250 per transaction. Russians are travelling to shop much more, with tourism having increased by one-third in both countries over the previous year.
The growth of Asian globe shoppers is not a singular phenomenon. The key to unlocking these growing markets lies in sound insight and intelligence, developing a service that appeals to the nationalities you want to target and designing a marketing strategy that puts your brand and its story in the hands of globe shoppers and at the top of their minds, right where globe shoppers should be in yours.