In depth: Chinese luxury tourists in Europe

INTERVIEW_ After our article on the shopping behavior of Chinese travelers abroad (see “Study: Chinese luxury tourist spending in Europe” of January 27th), we were curious to go deeper and find out more about how the study was carried out and how European retailers and brands could profit from

it. In conversation with James Button, head of the luxury project at Shanghai-based consultancy Smith Street, FashionUnited gained valuable insides into Chinese luxury consumer behavior.

SmithStreet

is a growth-consulting firm based in Shanghai that helps companies do well in China. Their clients are international brands already in China and those looking to enter the country. The consultancy's specialty is doing in depth-interviews and talking to different stakeholders like consumers, retailers, real estate agents and others.

Though most of the work is done for individual clients, the Chinese luxury tourist study came about when different clients expressed similar concerns. When travelling to Paris and Milan to meet with retailers, SmithStreet noticed that their clients asked many China-specific questions like how to address Chinese tourists, etc. In view of these common questions, the company decided to provide their clients with one syndicated report focusing on different branches (like fashion, jewelry, etc.) rather than individual studies.

120

Chinese luxury travelers share their experiences

Thus, the idea for the Chinese luxury tourist study was born and soon, SmithStreet followed 120 Chinese luxury travelers by doing in-depth interviews with them before and after their trips. Asked about how the 120 participants were chosen, Mr. Button explained that one criterion was that they had to have traveled to Europe in the last six months and made luxury purchases.

Also, the company made sure to pick an equal amount of travelers with a varying exposure to luxury. Thus, about one third of the study participants were so-called aspirational buyers who just started buying luxury items. Another third consisted of experienced buyers who have been buying luxury for quite some time. They do not necessarily have to be very wealthy but have been buying brands beyond known ones such as Gucci and LVMH. Last but not least, a third group of very experienced luxury buyers consisted of wealthy travelers who spend a lot of money on luxury items in China and abroad. To guarantee a good cross-section and representative results, SmithStreet made sure to have a good 50/50 split between men and women and those residing in Chinese Tier 1 and Tier 2 cities as well.

Those having read the aforementioned summary of the study may have been as puzzled as FashionUnited to learn that Chinese luxury tourists plan about 75 percent of their overseas purchases. “So were we,” admits Button and explains: “Chinese tourists need to plan their purchases so that when in Europe, they don't spend too much time shopping but free their time for other activities like visiting cities, famous sites and going to restaurants.”

This is different from European tourists visiting Hong Kong, for example, where shopping is a big part of the trip given the city's selection and reputation as shopping mecca. Button added that Chinese customers are getting more sophisticated and doing price comparisons and thorough checks on products to take full advantages of the lower prices and better assortment of European luxury goods than in China.

“It's going to be a little bit different though depending on what kind of consumer you are looking for," said Button about the planning behavior of each traveler. Going to the stores on site is important, as “in cities like Shanghai and Hong Kong, you see the brands everywhere,” so Button.

The next priority would be to go a brand's Chinese language site and then to the global site. But, Button stressed, “outside the big cities or in northern China, what people are saying about a certain brand becomes more important” than one's own research. Other important factors are price, category and where in China a luxury consumer lives.

Button pointed to one challenge for all international brands, namely to know who their potential consumers are and where they are coming from. Part of SmithStreet's assessment is therefore to determine if a brand needs to provide more information or needs to get people talking about it and its products, also depending on if the brand is big or a niche player.

Asked if a brands' Chinese language site really helps, Button said: "Yes, it absolutely does. One thing we have encountered is that even outside Tier 1 cities, people have problems [with accessing international brands] and brand recognition goes down.”

The question how important Chinese-speaking staff is in stores on the European end of the business is not an easy one. “It depends on the consumer. If the age is over 40, Chinese is very important; with younger consumers, the reaction could be the opposite as they want to have an authentic experience abroad,” explains Button.

Last but not least, Button pointed to one surprise that SmithStreet discovered during the course of the study: “Even when brands come in for the first time, there are consumers who know them; that phenomenon is very common," states Button. He points to Chinese overseas travelers as well as students who constantly keep their eyes open for new and exciting brands.

“At the same time, brands that are well-known in their home countries may not be known in China at all,” he adds. All the more reason for international brands and retailers to do their homework and know their customers well, regardless of where they live. Customer feedback is a great source but pressed-for-time tourists may be unwilling to provide that information on the spot after their luxury purchase in Europe, as well as exhibit a reluctance to part with their personal email address or cell phone number. “Brands and retailers really need to learn to use social media channels to their advantage”, advises Button.

Photos: Chinese shopper on a Parisian street (zoetnet)/line of Chinese customers in front of Prada store (Robert S. Donovan)/Burberry’s Chinese site (Burberry)/Cartier store in Paris (Neil Willsey)