The luxury retail industry is preparing for another major game changer – Chinese tourists. They are soon going to account for the largest share of retail consumers around the world, and therefore, are beginning to redefine the direction that the luxury retail industry is likely to take in the future. The numbers speak for themselves.
A recent Bain & Co study projects that Chinese consumers, who account for one-third of the personal luxury goods market now, will account for a staggering 46 percent of the consumer market by 2025. Similarly, Mainland China, which has seen its personal luxury goods market develop at a 9 percent compound annual growth rate, will see consumption rise to 22 percent by 2025.
The sixth edition of the Arab Luxury World, the Middle East’s leading luxury business conference, taking place on Wednesday, June 12 and Thursday, June 13, at the JW Marriott Marquis Dubai included a workshop on “Understanding Chinese Tourists 2.0” held by Jonathan Siboni, Founder and CEO of Luxurynsight. He provided various strategies that can be adopted to engage with the luxury industry’s largest and fastest growing consumer group.
“China has around 3.5 million millionaires. They are the biggest market segment to target in terms of luxury and premium luxury products and services. In five years, one out of every two luxury goods will be purchased by Chinese,” Jonathan Siboni said.
Close to 75 percent of Chinese retail purchases are made outside China, with the Middle East ranked as one of the top destinations in 2020. Figures from the Arabian Travel Market 2019 (ATM 2019) show that Chinese visitors to the event at the Dubai World Trade Center, this year, went up 106 percent compared to the 20 percent rise in international visitors. The total number of outbound Chinese tourists is expected to reach 260 million by 2030, according to data released by Luxurynsight.
“Today, Chinese tourists lead global tourism spending. They spend twice more than U.S. travelers. Their spending patterns doubled from $130 billion to $260 billion within a span of four years, between 2013 and 2017. Within the Top 20 source markets for visitors to Dubai, China has climbed from the eighth spot to the fourth.” Jonathan Siboni added.
Chinese travelers also comprise of a majority of digitally inclined millennials who are driving the change in consumer behavior toward a digital retail ecosystem, e-commerce, curated and personalized offerings, data-driven decisions, and new technologies such as mobile payments. 69 percent of Chinese tourists prefer to use mobile payments rather than cash or cards. Chinese multi-purpose messaging, social media and mobile payment app developed by Tencent, WeChat has 1 billion active users.
“69 percent of Chinese luxury consumers are millennials and Gen Z. A lot of these young Chinese were born and raised at a time of a ‘strong’ China, and therefore, are very optimistic. The ‘single’ child police in China has also led to a generation of affluent, young Chinese. This is important when we look at luxury consumer spending. 62 percent of Gucci sales are made by millennials,” Jonathan Siboni said.
Chinese tourists also seek new places to discover, and new experiences to enjoy, which they can then share on social media. This brings the spotlight back to social media platforms, influencers, as well as new methods of consumer engagement and novel marketing strategies.
“Cell phones, digital and social media are extremely relevant and important. For those who don’t know this, parts of China even have a walking lane for people using cellphones,” Jonathan Siboni remarked.
Chinese tourists from around the world have also begun to seek out brands with a strong heritage and historical pedigree, thus, making them a key consumer of the premium luxury market. Rich in cultural significance, these premium luxury brands that proudly showcase their histories going back hundreds of years and certain products, passed down through generations, are held in high esteem by Chinese society.