The explosion in Chinese tourism is changing the Australian retail industry

Photo: Chris Ratcliffe/Getty Images

An unusual wave of new shoppers is hitting upmarket stores in Sydney’s CBD and they represent one of the biggest opportunities in Australian retail in a long time.

Walk into Harrolds, the Australian family-owned luxury clothing store, and there are simple changes at the main counter — a stylish bowl of red and gold wrapped chocolates and upmarket Harrolds-branded pens in smart felt covers.

It’s Chinese New Year and they are there as gifts for customers from mainland China, who are flooding to Australia on holidays in ever increasing numbers — now around 1 million a year, growing about 20% annually — and spending between $7 billion and $8 billion.

The flow of new money, in terms of tourists and investment from China, is helping to take up the economic slack from the slowdown in mining investment.

Disembarking from planes in long lines, their numbers are second only to New Zealanders, but the big difference is the Chinese are big spenders, more than $7,000 each, twice the amount of most other visitors.

The average spend, by nationality, of visitors to Australia. Source: Tourism Australia.

While the tourists won’t get near December’s total local retail spend of $24.8 billion, the numbers are significant and Chinese New Year is becoming important, especially for top end luxury retailers. In 2015 around 160,000 mainland Chinese came to Australia for Chinese New Year. This year more than 200,000 are expected.

Globally, Chinese tourists spent more than anyone else. The last available numbers, for 2014, had them spending $230 billion a year and Australia is getting its share.

The phenomenon, driven by the exploding numbers of emerging middle class from the economic marvel which is China, has led to a new and curious view of Australia — as a destination for shopping.

The rise in Chinese visitors to Australia over the past over the past 25 years. Source: ABS.

Australia has been known for its beaches, the Great Barrier Reef, Uluru, Sydney Harbour and Opera House, and cute-looking indigenous animals such as koalas and kangaroos.

But shopping? It’s not central to Tourism Australia’s inbound marketing and Australians have grown up believing you head to places such as Singapore and Hong Kong for bargains.

There’s been little suggestion, until now, that people would travel to Australia just to shop, especially when in the past it was confined to picking up a pair of ugg boots and a local t-shirt on the way to the airport after a harbour cruise and a sunburn at the beach.

However, the world’s latest global traveller, the Chinese tourist, has changed that. And Chinese New Year, described as the world’s largest annual human migration, when families move across country and the world as one, is now a significant opportunity for Australian retailers.

According to a survey by Hong Kong-based investment bank and broker CLSA, Chinese tourists put Australia at 15th as a shopping destination, up four places from 19th a year ago.

Where tourists are heading to shop around the world.

And Australia’s retailers are developing strategies to take full advantage. Many luxury stores are launching commemorative Lunar New Year gifts. At Westfield Sydney, there’s a sale involving 100 stores. And David Jones is launching a Lunar New Year designer collection this week in partnership with the Australian China Fashion Alliance.

Most take UnionPay, the most common card used in mainland China, as payment. At David Jones, there’s a promotion — spend $1,000, pay with UnionPay and get a $100 gift card.

“It’s Christmas in February,” says Mary Poulakis, marketing director at Harrolds.

“It’s our second bite of the Christmas/New York cherry and we certainly focus on it a lot in our stores.”

Harrolds has students, mainland Chinese studying in Australia and regulars at the upmarket store, come back at this time of the year with visiting parents, siblings, aunts and uncles.

“We’re very conscious of the cultural components attached to that festivity,” Poulakis says. “It’s a big growth area for us … but it’s really just started to gather momentum.

“There’s been a huge shift in the Sydney store in particular and we are starting to see that in Collins Street [Melbourne] as well. It’s a good market to be able to tap into but you have to be aware of all the little intricacies and details that go with it.

“It’s not just about being able to capitalise on the [falling Australian] dollar, you have to be really conscious of their culture and understand the shopping and why it’s important to them.”

Using Chinese social media

Staff at Harrolds use social media to talk directly to customers, telling them when new stock arrives. This isn’t Facebook or Twitter but specific Chinese sites, such as Weibo and WeChat in Chinese.

This use of Chinese social media is being picked up by more and more retailers as they learn how to connect with these new shoppers. Chinese shoppers see social media as a way to research their purchases.

And the response is fast. “They will walk in the door,” Poulakis says. Harrolds typically gets clothing in small numbers in popular sizes. They go quickly.

At Westfield in Sydney’s CBD, the signage at the shopping centre is also in Chinese, in the lift and at the information centre where a Mandarin speaker is ready to give advice and directions. And there are cloakrooms, handy for tourists to leave their purchases when they go to eat.

And a lot of the stores are taking on Chinese speaking staff.

“Chinese New Year is becoming as big as Christmas for many of our retailers,” says Alison Pearson, Westfield Sydney Centre Manager. “They are seeing this as a really significant growth opportunity.”

Harrolds on Weibo, China’s version of Twitter.

This Lunar New Year, Westfield stores have a promotion to help bring the holidaying Chinese through the door.

“A key focus of their holiday is to shop and take back luxury product to share amongst their peer group,” says Pearson.

“They see us as being a destination for that now. It’s fairly new for this country to be a retail destination and it feels a little bit exciting.”

At the moment, the main demand shopping category is luxury. Think Zegna, Bottega Veneta, Prada, Miu Miu, Versace, Swarovski, Harrolds and increasingly the wares of rising Australian designers such as Alice McCall.

There’s a premium on uniqueness. Something which can’t be bought in China or Singapore or Hong Kong is sought after.

“It’s about luxury apparel and general accessories and jewellery,” says Pearson. “Our luxury retailers are reporting significant traffic. And they are also seeing an increase in the appeal for Australian designers.”

And the Chinese shopper is very informed. They arrive at a store having researched online in great detail. They’ve also sought the views of their peers, either directly or through social media. Trends matter. The prestige level, and scarcity, is important.

Digitally savvy

“Our Chinese consumers are digitally savvy,” says Pearson. “They are way ahead of us. They really want to be educated about their purchases in a very sophisticated way. And the shopping experience is a connected one, so free wifi is a great.”

Bargaining over price has been reported across at stores across Sydney to the amusement of shop assistants who don’t get this from locals. Some resort to taking these Chinese shoppers to the sale rack and telling them this is a big discount.

However, marketplace bargaining isn’t a problem at luxury stores. It’s more about personal service, exclusivity, being invited to events and a small gift of appreciation from the store.

“They expect such a high level of service — that one-on-one attention and contact — that when you are giving them that you can usually avoid the bargaining question,” says Pearson.

“It’s a value added thing, a gift or a glass of champagne. We would rather reward them than bargain back. It just doesn’t happen that often. And we do know customers are very excited by any discount or bargain and those shoppers come early to queue for any sale.

Westfield shopping centres are targeting Chinese luxury buyers.

“It’s worth noting that it’s a very enjoyable pastime for them. It’s peer recommendations as well. They will seek guidance from well-educated sales support but will also go to their peer group through technology to understand what the peer group is viewing as aspirational.”

The opportunity for Australia is huge but the rest of the world is catching on as well.

“Now that retail is climbing up the chart, it’s a very new trend globally,” says Pearson. “And we must start to rethink the offering here.”

China has more 200 billionaires and 1.3 million millionaires. By 2020, 400 million tourists will be flying out of China.

“Those numbers are huge, and as a retail business, we have of course identified the opportunity,” says Victoria Brown, head of marketing in Australia at Swarovski, the lead glass crystal specialists.

“Just based on the research we have seen recently, we know, for example, that 82% of Chinese tourist travellers view shopping as their number 1 priority when travelling, and of those shoppers, around half are buying jewellery and watches which is a consumer desire that we can certainly fill,” she says.

“This year for the first time ever, we have decided to activate a campaign specifically targeting those shoppers celebrating Chinese New Year.”

The survey by CLSA, now in its third year, shows shopping and expanding cultural horizons is now high on Chinese travel wish lists.

But Australia has competition. The top destinations are South Korea, Japan, Thailand, Europe, the US and then and Australia.

And while the number of Chinese tourists arriving in Australia keeps rising, the nation’s global share falling.

Scott Ryall, head of Australia research at CLSA, says Australia’s market share of Chinese outbound tourism has fallen as the Chinese government broadened the number of markets to which its citizens can travel. Market share has fallen from 3.8% in 2009/10 to about 3.5% now.

“This highlights increased competition for the Chinese traveller, from the rest of Asia and globally,” he writes in CLSA’s study, Chinese Tourists – Expanding Cultural Horizons.

“However, based on our work, we are optimistic that Australia can at least maintain market share and participate in strong and consistent growth from Chinese travellers.”

David Jones is running special promotions for Lunar New Year shoppers.

The investment flows from China to Australia are important also in keeping the tourists coming, according to Wei Li, a lecturer at the University Sydney Business School who researches Chinese investment in Australia.

“Australia has many of the things the Chinese are looking for such as clean air and a nice environment and also a very relaxed lifestyle,” she says

“We have international cities but we also have natural scenery. But also very important is the role of Chinese investment in Australia. Especially after the mining boom, what we are seeing is more investment into other areas such commercial real estate and agribusiness.”

The Chinese company, Wanda Group, which has invested in Hoyts cinema and is developing residential and commercial buildings, also has a hotel resort in Queensland.

“They are supporting Jetstar to get, for the first time, a direct flight from Wuhan in China to the Gold Coast,” says Wei Li.

“They are helping Jetstar with the bookings and offering packages to spend their holidays. So you are not just seeing Chinese tourists come to Australia to spend their money but also come as a result of Australian companies working with Chinese companies.”

There’s a lot of competition internationally for the Chinese tourist dollar.

“Australian and Chinese companies have to work together to ensure the tourists keep coming,” she says.

And they will keep coming.

A year ago, discussions between the Australian and Chinese governments produced a new agreement, which by October this year, will increase by 50% the 22,500 weekly seats airlines currently have between major Australian and Chinese airports.

That’s 500,000 more tourists annually. If they come with $7000 each to spend, that’s another $3.5 billion passing through the tills of Australian retailers.

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