Affluent tourists are sought after shoppers and a retail market’s most attractive segment. What does it take to grow your tourist retail sales?
Those of you working in travel retail know Global Blue. The company services tourist retail around the globe with VAT refund services. In this way they collect valuable information about a very precious consumer group. With more than 30 years in that business, they have collected a lot of valuable consumer information. Global Blue have shared some of their insights together with the Economist Intelligence Unit (EIU). This post takes an in-depth look at an example of these insights: the habits of Brazilian consumers and their luxury spending.
The Brazilian Dossier
Global Blue’s Infographic shows some core shopping patterns of Brazilians: 80% of luxury goods purchased are bought abroad, France is Brazilians’ most visited European country while New York makes the top of the list for luxury goods. The vast majority of Brazilians (80%) search online before traveling and shopping in Europe, and due to compound import taxes many goods are up to five times more expensive to buy in Brazil.
Have a look at the full infographic here. When reading the infographic, one question arises immediately: what does all that mean in terms of targeting affluent Brazilian households? Is expanding to Brazil worth it, or is it perhaps smarter to reach Brazilians abroad when traveling? We can’t answer this with one answer for all brands. But Brazil is without doubt an attractive and challenging brand market. The more pertinent question, however, is…
Do You Have a Tourist Strategy?
‘Expanding into BRIC’ (Brazil, Russia, India, China) was a strategic growth priority for many brands long before BRIC became a growth buzz word. In the early 2010s, many studies praised the opportunities of the ‘new’ consumer markets, but the hype is over. Russia and India continue to be tough local markets and the economic future of Brazil was questioned long before the 2016 Summer Olympics. It is left therefore to China to deliver some of the BRIC promises. So far China is on track and Chinese middle class consumers have become a large and attractive market for international brands, both at home and abroad.
Be it High Streets in Vancouver, New York, or Hong Kong, tourists from mainland China have become an essential part of local retail. We are all aware of the growing number of airports and duty free shops and tourist retail, but the far bigger portion of tourist retail sales is spent outside of the airports. Duty free shopping at Charles De Gaulle airport in Paris (Photo: Brand Pilots)
Many Chinese, for example, travel abroad on dedicated shopping trips. They travel purely to fill their suitcases with Western brands, which are 30-50% cheaper abroad than in China. And not only in airports or downtown: Bicester Outlet Village, Outletcity Metzingen or Lavallée have become key travel destinations for Chinese tour operators. Some even say they are more popular as Neuschwanstein Castle or the Eiffel Tower.
Europe’s Tourism Market
To cite Global Blue: “Shopping tourism is a multibillion dollar global industry, although its exact size is hard to pin down. In 2010 receipts from all forms of international tourism reached US$919bn, according to the World Tourism Organisation (WTO), but it does not specify what percentage came from crossborder shoppers. There is considerable evidence, however, that shopping plays a big role in determining where tourists go and how they spend their money. A 2005 book, ‘Shopping Tourism, Retailing and Leisure’, cites several studies showing that roughly one half of tourists say shopping is the first or second most important priority when choosing a destination.
Visa, the credit card company, monitors tourist spending on debit and credit cards for a handful of countries. In the first four months of 2010, retail spending by travellers to France, Portugal, Spain, Italy, Greece and Turkey reached €2.2bn (around US$3bn). Retail spending amounted to almost one-third of their total outlay and was the single biggest spending category. Europe is a particular beneficiary of the shopping tourism market. Nearly one half (44%) of global receipts from international tourism are spent in Europe, according to the WTO. Meanwhile, a small 2010 study of tourists’ shopping habits in the International Journal of Tourism Research found that Europe is seen as the world’s leading destination for luxury shopping, especially among those who are most interested in shopping while on holiday.” (Source: Global Blue European Paper).
So the tourist retail questions left to ask are: are your stores in the most attractive tourist retail locations? Which retail locations are you missing? To help answering them, take a look at the Globe Shopper Index, describing the most important tourist retail cities; cities scored by quality and quantity of brands, affordability and consumer convenience. Many tourists in Asia or elsewhere use this site to prioritise their shopping travel. We use this platform to score brands’ tourist retail penetration and plan priorities for future expansion.
How is Your ‘Tourist Readiness’?
You may not have a strong brand position in BRIC, but you may want to reach out to their consumers, when they visit High Streets. Many of today’s global brands benefited in their early days from affluent travelling shoppers. Abercrombie & Fitch in New York was for Europeans, what Gucci in Paris is for the Chinese today, long before A&F ever opened its first store in Europe. But luxury shopping is only a small portion of tourists’ buying. If you watch tourists on High Streets, their mid-market consumption is at least as large as in luxury retail.
So are you ready for those tourists? Not much is needed, often just a little add-on to your marketing, social media or customer service. But to provide excellent tourist services makes a significant difference in consumers in-store spending. Allow us to share our top 7 levers that improve tourist sales:
7 Key Success Factors in Retail Tourist Sales
|Social Media:||Is your communication and its languages geared towards the core tourist markets, even though you may not have stores there?|
|Tour Operator:||How is your networking towards foreign tour operators to get on their travel agenda?|
|Location Strategy:||What's the most attractive tourist locations for your brand?|
|Tourist Merchandise:||What is the depth and quality of tourist customisation in your offerings, to secure tourist purchases?|
|Customer Service:||What are the language capabilities of your top tourist destination?|
|After Sales Service:||Do you ship abroad, and actively promote the service?|
|Loyalty Programs:||Do you offer special loyalty programs to tourists, that they promote the brand at home and prepare for your market entry?|
Our top 7 list shows that much can be done to improve tourist retail sales. You will have addressed some of the things on that list already, but some may not be quite enough. Remember this: you have only one chance at a first impression. If you fail to deliver to Brazilian, Chinese or American tourists today, you may have to go a long way to win that consumer over when you open shops in their home market.
About the Author:
Guido is a global traveler in brand growth missions and a repeat tourist shopper on many occasions throughout the year. It was 1995 in Singapore when he developed the first brand growth strategy, including tourist locations. 20+ years and 30+ brands later his passion for brand growth strategies in Asia, Europe & the Middle East remains unchanged. If you want to collaborate with Guido on your own tourist retail, or simply share your thoughts on this post, you can reach him via email or read more of his work here.