The Middle East has become the new land of opportunity, especially for China.
Despite Trump’s announcement this week on withdrawing from the Iran nuclear deal, China said it will remain committed to working with Iran as an economic partner. For China, Iran is an important trading hub linking East and West Asia, and a key component in the country’s ambitious “One Belt, One Road” initiative, aiming to boost trade and further economic growth in the region.
“The initiative has already inspired brands to embrace a ‘can do’ attitude, and luxury brands can take advantage of the open economy,” said Jeremy Tran, regional account director at Reuter Communications. Reuter Comms is the first agency from Asia to open an office in Dubai to serve clients in the Middle East and North Africa region attracting Chinese travelers. Before the office opened, Tran said they had seen increasing requests from brands to capitalize on Chinese travelers in the region. The Middle East’s luxury retail market stands for an $8 billion opportunity.
Although Chinese tourists account for a comparatively small number of visitors to Dubai, they have the highest average per capita expenditure, followed by British and Kuwaiti tourists, according to a research by Mastercard. Majid Al Futtaim Group said Chinese tourists are responsible for up to 25 percent of luxury sales in the Mall of the Emirates.
Meanwhile, “One Belt, One Road” has offered an incentive for more countries in the region to open up tourism through visa-on-arrival and visa waiver programs. In November 2016, The United Arab Emirates launched a 30 day visa-on-arrival program for Chinese visitors, and have since enjoyed a 22 percent year on year increase in vistors.
“It’s still early stages for Chinese visitors to the Middle East, but they’re set to become an increasingly important part of the market,” said Marko Vucinic, Senior Vice President and Acting Head of Hotels and Hospitality Group at JLL Middle East and North Africa. Vucinic suggested that businesses should now be looking at innovative ways to provide experiences and services to meet the specific needs of the Chinese traveller.
Despite holding potential as a big luxury market in the Middle East, many Chinese shoppers are enticed by significant global pricing differences, and remain attracted to lower-priced tax-free luxury goods. This can leave brands struggling to engage with Chinese consumers and sustain traffic. Understanding the Chinese market’s preference for value-added services is an important component brands should consider as part of a long-term China strategy.
According to Reuter Communications’ report, Chinese travelers top three impressions of the Middle East are romance, fun and adventure. Experiencing an exotic local culture is a big draw for Chinese travelers, and the study shows they are willing to pay a premium price for the privilege.
Luxury brands are finding that Dubai’s high-end shopping malls are able to provide such extravagant experiences for travellers. Known as some of the world’s most-visited retail and entertainment destinations, shopping malls in Dubai are leading the way for luxury “retailtainment” experiences. The Mall of Emirate currently hosts Ski Dubai an indoor ski resort with the world’s third largest indoor ski slope.
One luxury company taking advantage of this opportunity is Swiss watch brand Rolex, who have recently built the Rolex Boutique in Dubai Mall. The store includes an exclusive cinema room, museum exhibit, and the “Rolex Experience”- an immersive walkthrough offering a glimpse into the world of the iconic brand.
Alongside enticing customers with experiential retail, it is vital for brands and retailers to accommodate Chinese travelers shopping habits by integrating mobile payment methods. The Outbound Chinese Tourism and Consumption Trend: 2017 Survey found that over 90% of Chinese tourists would use mobile payment overseas if given the option. “If a business can make it easier for customers to pay, they actually get more of their wallet,” said Tran.
Ahmed Alkhaja, CEO of the Dubai Festivals and Retail Establishment (DFRE) emphasized that Dubai is encouraging more businesses to accept Chinese mobile and online payment systems to cater to the needs of Chinese visitors. As of April 28, Chinese visitors to The Dubai Mall can use Alipay’s in-app Discover platform to pay for orders in RMB via the app.
Todd Hessert, founder of fashion media company Globe Fashion Runway, told Jing Daily that during his frequent trips to the Middle East, Dubai has become increasingly popular as a luxury location for Chinese tourists. “The city will be even hotter with Chinese tourists once it collaborates fully with WeChat, in order to offer informative and convenient city guides in Mandarin,” he remarked.
However, even brands incorporating both entertaining experiences and succinct mobile payment methods may not be certain for success with the Chinese market. Tran advises brands to anticipate the demand of Chinese consumers, through studying the market’s online activities ahead of their trips overseas.
“People may think they understand the market of Chinese travelers as a whole, but they don’t see how diverse the market is. Even among luxury consumers there are still so many tiers – so many different smaller communities among the big group. Therefore, it’s important to understand why they are coming to you. Why are Chinese consumers traveling to the Middle East? If luxury brands understand their motive, they can be better placed to personalize their services, and offer unique experiences to Chinese luxury travelers.”