Southeast Asian nations were the top choice for Chinese outbound tourists during the past Golden Week holiday, according to a National Day big data report, released by the country’s top social media platform WeChat on October 8th, and translated by our sister site Jing Travel.
This travel trend represents a clear sign to the international luxury brands that they need to take advantage of this critical opportunity to capture the traveling Chinese population, who make up the largest block of high purchasing power luxury consumers in the world. There are a number of ways that are available for luxury brands to serve the demand of traveling Chinese and boost their spending.
One strategy can be derived from duty-free shopping in the international airports. The same WeChat report revealed that Chinese tourists have remained firmly interested in shopping abroad, with 52 percent of the survey respondents indicating they purchased items at tax-free stores during the Golden Week holiday.
Even though the Chinese government has encouraged domestic luxury consumption in recent years, and luxury business in China has made concrete efforts to narrow the price gap between mainland and countries elsewhere, a number of factors including currency fluctuations and tax policy still make it appealing for consumers to purchase luxury items outside of the country.
A great number of luxury brands have noticed the need and have taken action to profit from the trend. For example, the American affordable luxury label Michael Kors in August released a collection exclusively for shoppers visiting their Hong Kong-based duty-free stores and initiated a marketing campaign with its global brand ambassador Yang Mi to promote it. Chinese e-commerce giant Alibaba Group also follows the trend. It has teamed up with Asian duty-free retailers since 2015 to provide a service that allows Chinese online shoppers to purchase items in advance and pick them up in the airport stores when they travel.
Luxury brands should also be aware of the importance of WeChat when they attempt to market to Chinese consumers who travel to the Southeast Asian countries. As Chinese travelers, especially the millennial generation, become increasingly mature and sophisticated, they are no longer interested in traveling in groups compared to their predecessors, as the experience of group travel lacks a sense of spontaneity and uniqueness.
This new trend has given birth to the term of “Free Independent Travelers”, or FIT, in short. One key characteristic of the group is that they like to customize their travel itinerary, which means they do heavy research before they take trips via social media platforms such as WeChat — the uncontested most important channel nowadays.
As a result, the ability to create high-quality WeChat marketing campaigns before and during the Golden Week holiday is crucial for luxury brands if they hope to lure in money from traveling Chinese people. It is, indeed, not a hidden truth for luxury brands in China—a great deal of them pushed out WeChat posts about the holiday this year, however, only Hugo Boss, Coach and Furla excelled at it this time.
The mobile e-commerce boom in China is another aspect that luxury brands need to take into account in order to encourage the country’s tourists to spend during their trips in Southeast Asia. Major players, such as Alibaba and Tencent, have pushed hard to transform China into a cashless society with the introduction of Alipay and WeChat Pay, respectively, in recent years.
Statistics from the Clearing Association of China show an exponential expansion of mobile payment market at a rate of over 195 percent between 2013 and 2016, showing insight into the changing behaviors of Chinese consumers.
Luxury brands must take note of their evolving payment habits by enabling mobile payment solutions like WeChat Pay and Alipay. However, there is at least one major limitation in mobile payment apps: the spending cap policy imposed by the Chinese government. Users of WeChat Pay and Alipay currently can only spend up to 5,000 yuan per day. Therefore, if the items exceed this amount, which is highly likely for luxury consumption, Chinese buyers cannot settle the deals.
Since earlier this year, Chinese e-commerce giant Alibaba started to expand in Southeast Asia, evidenced by its $1 billion investment in the local e-commerce company Lazada which serves six countries in the region. The expansion, which is still at its early stage, represents Alibaba’s ambition to replicate its success in Southeast Asia.
For luxury brands, it is likely to open another window for them to serve Chinese consumers when they travel to the region, in a way of shopping that they are most familiar with. Online shopping is relatively more accepted among Chinese than the Western counterpart.
In mainland, an increasing number of luxury brands including Burberry, Tag Heuer, and Hermes-backed Shangxia have shrugged off the concern of counterfeiting issues with Alibaba and jumped on the platform to sell directly to Chinese.