In Paris, Chinese Shopping-Tour Buses Go Out of Fashion; Retailers Rethink Strategies as Fewer High-Spending Visitors Arrive en Masse

July 23, 2013, 5:01 p.m. ET

In Paris, Chinese Shopping-Tour Buses Go Out of Fashion

Retailers Rethink Strategies as Fewer High-Spending Visitors Arrive en Masse

NADYA MASIDLOVER in Paris and LAURIE BURKITT in Beijing

For her recent vacation in Switzerland, Wu Mengbei shunned the whirlwind bus tour of luxury stores many Chinese tourists take in Europe.

The Shanghai resident booked her trip independently and chose to spend more on other activities, such as sightseeing and dining. “On my first couple of trips to Europe I did a lot of shopping, but it’s not so much a priority now,” says Ms. Wu, a bank marketing manager in her thirties.Ms. Wu’s choice highlights a growing challenge for Europe’s luxury-goods brands: More and more Chinese vacationers are turning away from tour-bus travel and frantic shopping trips, instead opting to upgrade their overall holiday experience by spending more on other things.

By 2020, purchases by such individual Chinese tourists abroad—on travel, food, accommodation, entertainment and shopping—will overtake that of tour groups, which currently dominate spending, according to data from the Boston Consulting Group.

The shift is contributing to a slowing rate of luxury spending overseas, say market watchers. Overall spending in Europe by Chinese shoppers rose 18% in the first quarter from a year earlier, a sharp deceleration in growth from the 45% jump the previous year and the 69% spike in the first quarter of 2012, according to data collected by tax-refund service Global Blue.

This slowdown partly stems from the fact that many tourists are no longer on their first trips abroad and are looking for fresh experiences beyond shopping. But the move away from organized bus tours also is playing a role.

“Lots of brands think that they have great business with Chinese tourists, but what they may find is that they have great business with tour guides,” says Manelik Sfez, head of corporate marketing for Global Blue.

Chinese nationals are set to remain an explosive force in global tourism. And while individual tourists aren’t expected to turn their backs on luxury shopping, they are likely to be more difficult to target than larger groups who hit the luxury stores as part of their tours.

Attracting independent travelers is different than working with tour groups, says Christine Lu, co-founder and chief executive of Affinity China, a New York-based marketing and travel company that focuses on upscale Chinese shoppers. “It takes more than putting a Mandarin speaker in the store,” she says.

Travelers on organized tours have led a Chinese tourist boom in recent years, which propelled China’s spending on outbound travel to $102 billion last year, a 40% jump from 2011. The surge sent China screaming past Germany and the U.S.—the former No. 1 and No. 2 spenders, respectively—according to the United Nations World Tourism Organization.

The flood of Chinese tourists to high-end stores in Paris and elsewhere in Europe reshaped how luxury brands operate, helping to offset the impact of the recession in the euro zone. Many purveyors of designer handbags, shoes and other apparel opened shops in department stores like Printemps and Galeries Lafayettes in Paris because Chinese tourists go there for one-stop shopping.

Printemps built duty-free counters specifically for Chinese visitors and hired Chinese-speaking floor staff. Galeries Lafayette advertises its Paris store thousands of miles away in China, forging its place on a European itinerary. Both stores pay commission to tour guides as an incentive to bring in Chinese tourists, according to people familiar with the matter.

Now, cracks are appearing in the tour-bus boom. Independent travelers still make up a minority of long-haul Chinese holiday makers, but growth in the segment is outpacing that of bus-tour-style group travel, as China’s more affluent classes flourish and middle-class travelers make their way back to Europe solo.

The proportion of spending by first- or second-time travelers who rely on tour operators is expected to fall to 42% by the end of the decade from an estimated 56% in 2010, according to Boston Consulting Group.

Even those still traveling in groups are looking for a more tailored experience, says Conor Yang, chief financial officer of online Chinese travel agency Tuniu, which offers tours that include smaller guided visits and standard larger bus trips. His site has seen more demand for packages that include things like vineyard trips rather than just shopping.

“Most of these tourists have already bought the handbags and other luxuries by now,” said Mr. Yang. “They want more.”

On his first trip to Paris recently, Zhang Zheng Guo, a 67-year-old from Shanghai, said he had been brought to Printemps to shop along with the rest of his tour. But he said he would prefer to be visiting museums. “This is not how I personally would have chosen to spend the time,” said Mr. Zhang.

Designer labels play down the effects of the trend.

“The [luxury] houses are used to giving a very personalized service,” said Elisabeth Ponsolle des Portes, who heads an association representing brands including Chanel, Cartier, Louis Vuitton and Yves Saint Laurent. “It’s not a question of specific preparation for the Chinese.”

Printemps, which makes around 10% of its annual revenue from Chinese visitors at its flagship Parisian store, is working on building customer loyalty among this group. About a year ago, it extended its existing mystery shopper program to include undercover “clients” speaking Chinese and a number of other languages.

“It’s up to us to know how to tap into this clientele and meet their expectations,” said store manager Pierre Pelarrey.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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