All-Consuming Urbanisation (& Tourism)

Related entries: Business Issues, Consumer Market, General, News

Urbanisation and consumption in China come together in this week’s post.

The former is said by the Hong Kong Trade Development Council to be an “irresistible force” and a key plank of China’s development plan. They note that:

The “National Plan for Promoting Healthy Urbanisation (2011-2020) has been reportedly formulated. Under this, over 20 city clusters will be built across the country…It’s expected that comprehensive support measures for urbanisation reform, covering land, household registration and social, healthcare and education services, will also be introduced successively in 2013.”

The infrastructure and construction side of urbanisation was covered in our recent post China’s Urban Billion(s). Here we’ll look at some recent news on the consumer side – because urbanising, means consumer spending…

While many of the big international consumer goods companies are already targeting the Chinese middle class in a widening variety of cities (hundreds of which will not be familiar to most outside of China – see our post here), there are also significant sales opportunities closer to home. This is because much of the spending on luxury items (some 60%) happens outside China, HSBC’s new report on luxury retail trends, also highlighted by HKTDC, addresses this point:

“HSBC’s new report on luxury retail trends looks at the influence of Chinese travellers on luxury consumption globally. The Bling Dynasty found that mainland residents, now able to travel abroad more freely, are already dominating in many luxury markets, particularly in Hong Kong, the luxury capital on the mainland’s doorstep.

The report found that, on average, Chinese travellers spend more than one-third of their travel budget on shopping, compared to only 11 per cent on food and accommodation. This contrasts with Americans and Germans, who are likely to spend more on accommodation. Given this propensity and the increasing wealth of Chinese travellers, the report noted that they are likely to increase their spending substantially.”

Amazingly “75 per cent of watches sold in Hong Kong, and close to 60 per cent of handbags and accessories, are bought by visiting mainland tourists”.

But are other shopping destinations such as London taking note? Perhaps it is surprising that only around a third of watch brands in a recently-visited major London department store have any Chinese branding or literature, and that less than half of the high-end stores on Bond Street advertise China UnionPay payment facilities.

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Jing Daily makes the point that, even when retailers and brands are aware of the opportunity, many are unable to capitalise on it effectively:

“Chinese tourists are on track to take more than 155 million overseas trips by 2020 and will make 1.7 million arrivals in the United States in 2013.

With luxury brands like Hermès receiving as much as 30 percent of global sales from Chinese customers, it is no wonder that they are one of the most pursued customer segments by luxury brands and hospitality providers…But despite aggressive courting of Chinese travelers in key gateway cities around the world, few luxury providers actually understand what they want.”

As more Chinese tourists travel further afield in search of special experiences and exclusive offers, more international brands have an opportunity to adapt their offering and proactively (and profitably) engage – without even having had to set up shop in a far-away city cluster.

We’ll be exploring the issues with our specialist partners on our new China Edge LinkedIn Group.

(But for brands that wasn’t more practical support, check out our China Edge event on July 3, in London: Service and Hospitality for High Net Worth Chinese, London, Wednesday, July 3, 2013)

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