Value Retail Cashes in on Chinese Shoppers’ Turn Toward Experiential Luxury

Value Retail's Suzhou Village outlet shopping location, which opened in May 2014. (Jing Daily) With sky-high prices for luxury goods in mainland China, Chinese shoppers are making most of their purchases abroad and outlet malls are popping up all over the country. European luxury outlet retailer Value Retail is one of the major players expanding in China, but it’s embracing a philosophy that Chinese consumers are looking for something more than just price when they go on their outlet shopping sprees both at home and abroad. After opening its first China location in Suzhou in May 2014, Value Retail is slated to open its second outlet mall in Shanghai’s International Tourism and Resort Zone at the end of the year, where it will operate near the new Shanghai Disney Resort to attract Chinese vacationers. The company began its expansion plan in China after its nine European locations gained massive popularity with Chinese tourists, who made up 44 percent of all of their non-EU tax refunded sales. In 2014, the increase in tax-refunded sales at its UK location Bicester Village exceeded growth in tax-refunded sales in London by 15 percent. Shopping is a top activity for Chinese travelers abroad thanks to high tariffs on imported goods on the mainland, and a greater shift toward international spending had been attributed as a major cause of China’s luxury slowdown in addition to the country’s ongoing anti-corruption campaign. Shoppers at Value Retail's Suzhou Village. (Courtesy Photo) Price is only part of the equation, however, for the main reasons Chinese tourists are visiting its locations both at home and abroad, according to Value Retail China CEO Mark Israel. “While price is relevant, price isn't the dominant concern that we look at,” he says. “The people that are drawn to what we do are the people that are drawn to the opportunity for the experience. They’re drawn to the exploration; they’re drawn to the environment; they’re drawn to the total picture, and then, the bonus for them is that they're also getting a great price.” As a result of this focus on experience, the company aims for aesthetically pleasing designs and special amenities and features to complement a shopping trip. Designed around a “Marco Polo” Silk Road theme, its Suzhou Village location features buildings in Venetian, Middle Eastern, and Chinese architectural styles and offers dining options, cafes, an exhibition space, and a VIP lounge. As Chinese tastes trend toward more unique and niche styles, the location features an artisanal silk shop with special demonstrations of the silk-making process, as well as a boutique dedicated specifically to emerging Chinese designers. “The consumer everywhere in the world continues to evolve. It happens to be happening much more quickly here because this was a less mature market,” says Value Retail Management CEO Desirée Bollier, who oversees the company's Europe properties, on the growing interest in experience among Chinese shoppers. “That consumer becomes more and more discerning. We think that the consumer living here in China—if they’re not already, they will be the most discerning consumer in the world very shortly.” Value Retail focuses on the aesthetics of its shopping space at Suzhou Village. (Jing Daily) There are also many logistical considerations that help bring Chinese consumers through Value Retail’s gates in China and Europe. To attract Chinese travelers to Value Retail’s Europe locations, Bollier says that it began forging partnerships with Chinese travel and payment companies in 2001. “Their engagement with this market paid off, because tourism takes at least three or four years to build momentum and traction,” she says. In addition to partnerships with China Eastern, China UnionPay, and several hotels, the company just signed an agreement with online travel booking site Ctrip that allows shoppers at its Europe locations to earn points with Ctrip’s Overseas Retailers Rewards program. “It was cultivated for years to lead us to 2015. It’s not an overnight kind of deal; it’s a true buildup of partnerships." The brand’s Suzhou exhibition space is currently housing an exhibition in partnership with the UK government’s GREAT campaign to promote British brands, innovation, and tourism. “The objective always here is to create a destination and an experience for our guests that is different from what they could find somewhere else,” says Israel. “In the case of Best of British, we could take that foundation and the relationship with GREAT and the showcase and use that as an opportunity to have our guests explore iconic British design, British innovation, and British creativity.” Despite China’s overall luxury slowdown, Bollier says that European sales to Chinese consumers are still seeing high growth. In addition, she believes the rise of China’s upper-middle class and Value Retail’s experience-oriented positioning will lead to future growth for the new China locations. “Luxury slowed down relatively because maybe there is a recalibration of the market offer and market demand that needs to take place," she says. “It was the wild wild west for awhile, and like everything, it just needs to recalibrate itself.” “In volume alone, there is no slowdown, however, what is changing is the want—where they’d like to spend their time, where they like to spend their money, how they like to spend it. This is what we’re witnessing. There is a slight shift of behavior.”

Value Retail Cashes in on Chinese Shoppers’ Turn Toward Experiential Luxury

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Published April 06, 2015

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Value Retail Cashes in on Chinese Shoppers’ Turn Toward Experiential Luxury