How Retailers Can Entice Chinese Tourists

RAPAPORT... You don't have to be in China to sell to Chinese people.That's the message from luxury marketing experts, who point out that tourists,students and immigrants from the world's largest fine-jewelry consumer have ahuge impact on the retail sector in Western countries. "The joke in the high-end luxury-goods community is that ifyou want to start a new luxury brand, the place to put it is where Chinesetourists go," says Marty Hurwitz, CEO of US-based research group MVI Marketing."Chinese tourists and their spending power in the US - particularly in themajor population centers - are driving brand growth in many categories, butcertainly in jewelry." Large jewelers from the greater China region know this, andhave been launching stores in North America to capitalize on local demand fromconsumers who already recognize these brands. In 2016, both Chow Tai Fook andLuk Fook opened stores in Flushing, New York, a neighborhood with a largeChinese population. Luk Fook also has stores in San Francisco, California, aswell as in Canada. Expats are "actually driving a lot of luxury spending now,"Hurwitz notes. Hong Kong-based retailers' expansion into the American market is"a really solid strategy, because there are pockets of [established] immigrants[with disposable income] that have very high levels of spending power in theUS." There were 2.3 million Chinese immigrants in the US in 2016,up from 1.2 million in 2000 and 1.7 million in 2010, according to MigrationPolicy Institute, a Washington-based think tank. Their biggest population hubswere New York, San Francisco and Los Angeles, notes the organization, addingthat Chinese expats are twice as likely as US-born Americans or otherimmigrants to have a graduate or professional degree, because many of themarrived as college students or highly skilled workers. Study partners Other Western markets have seen a similar phenomenon.High-spending Chinese students in the UK number about 95,000, with each of themreceiving an average of 3.3 visits per year from family members, reportsAnglo-Chinese digital-marketing agency Emerging Communications. Those studentsthen act as retail tour guides, showing their relatives where to buy things.The total number of Chinese tourists in British locations is higher still. "Rather than taking the large step of establishing apresence in mainland China in order to sell to the growing millennial audience,it is possible to enter the market in a relatively easy and modular way bytargeting the half-million wealthy Chinese tourists that visit each year, thevast majority of which are millennials focused on buying," explains EmergingCommunications CEO Domenica Di Lieto. On their terms However, retailers have to get it right when selling toChinese people, whether in China or elsewhere. Chinese millennials can easilydistinguish between brands that are really dedicated to attracting theirbusiness, and those that just want to make money fast, says Di Lieto. They hateclumsy translations, overly direct promotions, and marketing that makespresumptions about buyers. "There have been some very big British names that havearrived in China and assumed that doing what they do elsewhere will work," sheadds. "Brands ranging from [large UK supermarket chain] Tesco to [fashiondesigner] Paul Smith quickly learned the hard way that no matter who you are,you have to do things the Chinese way when selling to Chinese consumers." Upmarket London department store Harrods was much moresuccessful with Chinese tourists because it realized it had to play on theconsumers' terms, Di Lieto continues. Years ago, the retailer carried outresearch and discovered that Chinese consumers visiting the UK were notfamiliar with the brand - the first time it had found such broad-scaleunawareness of its name in the global market. Since then, it has developed Mandarin mobile apps for itsLondon store, begun accepting Chinese credit cards and payment through WeChatand Alipay, hired Mandarin-speaking store assistants, and started conductingtours in the language. It also uses Alipay's localized marketing tools to sendautomatic messages to consumers who are near the store, Di Lieto says. "Harrods...understood it had to attract Chinese consumers andserve them on their terms, and as a result, the average purchase spend pertourist is now more than GBP 2,000 [about $2,610]," she states. Social life Chinese consumer behavior is already changing retail in away many people may not believe, according to MVI's Hurwitz. Mobile shopping is much more popular among Asians than amongAmericans, so much so that jeweler Michael Hill has staff members in its NewZealand stores who are exclusively selling via social media platforms such asWeChat, he reports. And they're bringing in good money in the process. "These consumers are making remarkable, thousand-dollarpurchases with just an image from the sales rep," Hurwitz notes. "It'sbrilliant. I don't think that's happening quite as much in the US, but clearlyan immigrant population in the US has more purchasing power, [and] I expectthat will happen more. In my family, we're certainly doing more of that." US retailers looking for an entry into the Chinese marketcan start at home - but they can only succeed if they truly know their targetaudience. Season's readings: What US jewelers can expect for the holidaysThis holiday season will be betterthan many previous ones due to strong consumer sentiment - but only forretailers that innovate, according to MVI Marketing's Marty Hurwitz. There'salso less pressure to discount compared with previous years. "The economy is quite strong;consumer spending is starting to edge up nicely," he notes. "I believe that allthose that have survived jewelry retail - that's not everybody, but those thathave survived and are inventorying new product this year, not old product - willmost likely do well. That includes upper-end luxury." The trade war with China iscontributing to increased awareness of American-made jewelry, especially insmaller US cities, he continues. (In larger population centers, demand is moredown to price.) An upsurge of women artisanal designers and manufacturers, aswell as female self-purchasers, has helped drive that trend. Consumers are evenwilling to pay a premium for products originating in the US, Hurwitz adds. The interest in US-made productsand branding, MVI research suggests, "began even before the tariff situationevolved, but has been expedited because of the tariff issue being so prominentin the news these days," he explains. In the fashion-jewelry segment,price pressure is leading retailers to offer more silver as settings fordiamond items, and more lab-grown melee is appearing. "We're seeing the diamondmarket continue what has been an ongoing trend [toward] lower price points. Ithink this is mostly to get to self-purchasing females." Meanwhile, he predicts, those whohave strong omni-channel capabilities will sell goods. Jewelers often sayconsumers mainly do research online and make the purchase in-store, but it'snot clear if that's true, Hurwitz adds. "There are websites that are ringingtheir cash registers in $1,000-plus sales, in $10,000-plus sales - not just injewelry, but in a lot of different products," he says. "There are plenty ofconsumers spending plenty of dollars in e-commerce. There are also manyconsumers doing research online and going into the store. There's no oneanswer; that's why you have to have an omni-channel strategy."This article was first published in the October 2018 issue of Rapaport Magazine.Image: A Chinese tourist shopping in London. (Michaelpuche/Shutterstock)