Global Chinese Travel Is Providing Relief to Retail Sector, but Online Shopping Remains a Threat

It’s a well-established fact that online shopping is disrupting the global retail sector, both in developed markets as well as in developing markets such as China and India. While online shopping is a rapidly growing aspect of Chinese consumption, unreliable supply chains, and uncompetitive pricing compared to purchasing goods overseas has proven a significant relief for physical retailers in destinations frequented by Chinese travelers. However, Chinese tourists’ retail spending is not immune to the threat of online shopping in more developed markets, especially not as travel patterns are changing. Some people may find it surprising that malls and department stores across Europe, America, and East Asia spend so much of their marketing dollars on events, promotions, and campaigns that cater to Chinese tourists—which, after all, represent a minority of shoppers in perhaps all destinations except Hong Kong. However, years of strong growth of Chinese shoppers and increased competition from online retailers across products of all price ranges for local customers has made it a customer segment worthy of big bets. The effect of the latter has perhaps been felt the hardest in China, where 65 percent of Chinese shoppers buy goods online at least once a month on their mobile, compared to 22 percent in the United States. Despite being highly affluent in online shopping compared to overseas markets, travel shopping remains a largely offline activity for Chinese consumers—and the reasons are many. Often equipped with only Chinese UnionPay cards, cash, and Chinese mobile payment solutions such as AliPay and WeChat Pay/TenPay, ordering products is often impossible. Buying products online and then having them shipped to a hotel can also be an off-putting prospect, which even if it shouldn’t pose any problems, is not common practice. Perhaps the biggest problem for many travelers, however, is the way that many Chinese people travel: short stints in each destination before heading on to the next, leaving little to no time to wait for ordered packaged to arrive. Unsurprisingly, offline shopping remains king for Chinese travelers when overseas, and retailers around the world are benefiting immensely from the rise of global Chinese travel. Nevertheless, Chinese travel patterns are changing, and repeat visits and a growing emphasis on authentic experiences are making many Chinese travelers opt for independent travel and longer visits to each destination. With more time to seek out the best prices, which remains the most important reason for shopping abroad, Chinese travelers may just find themselves trying to figure out how to use overseas online marketplaces during their travels. A highly influential group of people which is often overlooked by marketers may also play a role in driving Chinese travelers toward online shopping: Chinese students. A record number of Chinese students are studying abroad each year, forming large communities of Chinese people in the know in countries across the world. In 2016 alone, over 300,000 Chinese students were enrolled at U.S. universities, and they represent the largest group of international students in numerous destinations popular with Chinese tourists. While their role in boosting VFR travel (visiting friends and relatives) is undisputed, their roles as important key opinion leaders (KOLs) for prospective global Chinese travelers is often overlooked. An often quoted example of a Chinese tourist shopping success story is United Kingdom’s Bicester Village fashion outlet, which gained popularity among Chinese students in the UK, and soon became the second most visited attraction for Chinese visitors to the UK, trailing only Buckingham Palace. Chinese students, very much used to the importance of online shopping in their home country, bring this shopping behavior with them for their international studies, and unlike their tourist counterparts, are not shying away from online shopping during their stints abroad. While they may not be suffering from the same barriers of entry as many Chinese tourists do, their shopping behavior can be indicative of what’s to come for Chinese tourists. If Chinese students start recommending their friends and relatives to buy things online, whether it’s fashion, luxury, or electronics, that should be a serious concern for offline retailers—which are increasingly reliant on Chinese tourist spending to stay afloat. In South Korea, the risk of a substantial decrease in Chinese visitors is already making investors wary of companies that rely on Chinese tourist spending for their bottom lines. Just like how JD.com and Taobao changed Chinese shopping behavior in China, overseas online retailers—or perhaps the global expansion of their Chinese counterparts—could revolutionize Chinese tourists’ shopping behavior. A little-known fact is that Amazon already accepts UnionPay payments, and more are likely to follow.

Global Chinese Travel Is Providing Relief to Retail Sector, but Online Shopping Remains a Threat

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Published March 10, 2017

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Global Chinese Travel Is Providing Relief to Retail Sector, but Online Shopping Remains a Threat