China’s luxury consumers are known for being price conscious, considering the fact that they get roughly two thirds of their goods outside the mainland thanks to its significantly higher luxury prices. With the swelling of China’s middle class and continuation of its economic slowdown, a new wave of Chinese consumers has caught onto the lower prices of outlet malls both at home and abroad, driving up sales and new mainland outlet openings.
China’s well-heeled have long traveled overseas to shop due to the high import tariffs and the limited product lines for luxury goods sold in domestic boutiques, but not every mainlander can afford the time and expenses of shopping at Louis Vuitton in Paris, Burberry in London, or Prada in Milan. Many domestic and foreign luxury outlets have thus seized the business opportunity presented by middle-class shoppers, flocking to the Chinese market and opening discount outlet malls to help local consumers get luxury bargains at home.
Outlet malls are often seen as a common thing in the United States And Europe, where consumers can get a fair amount of discounts on luxury goods, particularly during the holiday seasons. In foreign luxury havens like New York, London, and Paris, outlet malls have also become go-to places for Chinese tourists. Take the outlet mall Woodbury Common in New York, for example: the number of Chinese tourists seems to have surpassed Japanese tourists as the most frequent foreign visitors. The outlet mall has even hired a Chinese speaker to be their customer service supervisor and sales personnel who are able to speak not only Mandarin, but various other Chinese dialects.
According to European discount luxury outlet chain Value Retail, an amazing three out of four Chinese tourists to the United Kingdom chose to visit their Bicester Village outlets in Oxfordshire, making it one of the hottest destinations for Chinese tourists. This is good news for Value Retail, as mainlanders spend more per transaction than shoppers from any other country, reports Chinese-language media outlet NetEase. Value Retail said that Chinese shoppers now make up a third of its tax-refunded sales for international tourists, up from just 18 percent five years ago.
As Value Retail pointed out, the model of retail tourism that has proven to be a success among Chinese tourists abroad will likely be popular at home as well. Value Retail’s newest Chinese outlet mall, Suzhou Village, is slated to open in early 2014 and will contain approximately 100 boutiques and span over 27,000 square meters. The government-backed outlet will offer brands which are normally presented in Value Retail outlets, such as Prada, Gucci, Dior, Nike, Adidas, and Puma.
In addition, the outlet will offer a number of European luxury shopping experiences such as “hands-free” shopping and fine dinning services. Located in Suzhou, a city about 50 miles outside Shanghai, Value Retail expects the outlet to become the number one designer outlet mall in China, attracting about 80 million visitors to Suzhou annually. Inspired by Italian architecture as well as traditional Chinese elements, the outlet will include high-end hotels and cafés, creating a European experience for mainlanders, said Value Retail Chairman Scott Malkin.
Not far from Suzhou, a domestic outlet mall backed by Shanghai Bailian Group just opened in Jiangsu’s Wuxi City last month. Based on the model and architecture of American outlet malls, the shopping center aims to bring a unique American retail shopping experience to local consumers. At this point, more than 230 brands have already signed up to open stores in the outlet. The new location is not doing too shabby: on the opening day, the outlet attracted more than 100,000 visitors, who brought in 5.6 million yuan ($912,000) in sales.
Foreign outlets are likely to have a better chance to attract more shoppers than domestic ones, as mainlanders seem to prefer foreign outlet malls, even though they sell the same wares as domestic. Although domestic outlets have been operating for over a decade, they lack the ability to attract top brands like Bulgari, Burberry, or Prada, who worry about the risks to their reputations that being sold in at outlet mall could pose. Top brands would rather trust foreign companies with whom they have had a long-term relationship.
Given China’s current shaky economic outlook, outlet malls might have a good chance to prosper as they are geared toward the country’s price-sensitive fashionistas. Moreover, outlets are a good source for luxury brands to get rid of excessive inventories due to the Chinese government’s recent austerity campaign.