The year 2018 saw intense change in cross-border China retail, marked by rapidly evolving consumer trends as well as enhanced services and solutions to delight global Chinese shoppers.
As the co-founder of China Luxury Advisors (CLA) – a global consultancy that advises and works collaboratively with luxury brands, tourism boards, destinations and upmarket retailers on their China consumer strategies – we expect to see continued growth in the number of Chinese overseas travellers in 2019, but also anticipate accelerated changes in key consumer travel behaviour and spending patterns.
We expect the number of outbound Chinese tourists to increase, but the average spending amount per trip could continue to decline slightly.
Global brands and retailers will be watching market trends like these, but the industry will also increasingly look towards governments around the world for hints at forward-looking trends such as China’s crackdown on daigou (personal overseas shoppers), the US-China trade war, Beijing’s economic policies, changes in tourist visa policies, and exchange rate fluctuations.
But with fewer than 10 per cent of Chinese citizens holding passports, one thing is certain: spending by Chinese travellers is positioned for long-term growth. The Chinese domestic luxury market is expanding rapidly – posting greater than 20 per cent growth for each of the last two years.
And the impetus for buying overseas is constantly shifting, requiring brands and retailers to innovate and optimise their global offerings to retain a share of this hotly contested market.
With that said, here are trends we would prioritise in 2019:
Global prices will further align, and the price gap between luxury goods in China and other countries will continue to shrink.
This trend has already taken hold over the past two years, and we expect price gaps to continue to narrow after industry leaders such as Chanel and Burberry have taken action to narrow the price gap between China and the rest of the world, setting the trend for other luxury brands to follow.
Chinese tourists will venture off the beaten path to visit new destinations.
We expect that experienced travellers will increasingly shun the guided tour system, take firm control of their itineraries and visit exciting locations that are sure to make their friends back home swoon.
China Luxury Advisors and Coresight Research recently reported a surge in the proportion of respondents who had made all their own arrangements and travelled completely independently (without a tour guide) on their latest trip, from 20.7 per cent last year to 26.8 per cent this year.
That bumped independent travel ahead of package tours as the second-most-popular option after group travel. Travellers from tier-one cities are leading the charge in independent travel.
O2O (online-to-offline) will dominate the consumer experience. By 2025, a Bain & Co study shows that 100 per cent of Chinese consumers will seek inspiration online before purchasing offline.
We anticipate 2019 to be the year that overseas retailers close the loop between online and offline with travelling Chinese consumers – adopting mobile payment options, offering in-language customer service, deploying innovative customer experiences and creating branded gamification to connect with these global consumers at the point of purchase.
Unique products not available in China will outsell products that are more broadly available. As price disparities narrow, Chinese travellers are not only motivated by price, but are seeking unique products not available in China when they shop overseas.
Whether these are limited edition products from top global brands, niche brands not yet in China or local products from museums or local artists, Chinese consumers will gravitate towards hard-to-find products to take back to China.
Chinese apps will continue to expand their location-based media and advertising options. As platforms from WeChat to Dianping enhance their location-based media targeting capability, brands and retailers will increasingly pinpoint consumers before, during and after their travels, allowing for more targeted messages and engagement with these consumers.
We expect brands and retailers to become more sophisticated in reaching these consumers with relevant, focused messaging throughout their travel experience.
Little Red Book will become an even more integral part of customer’s overseas shopping research. In addition, the platform’s most recent tie-in with Taobao will make their social content even more directly linked with e-commerce.
We believe that brands and retailers should be scouring Little Red Book and other travel and shopping forums to understand what Chinese consumers really think of them.
Brands will increasingly collaborate with Chinese celebrities and key opinion leaders (KOLs) to develop products and experiences.
Brands and retailers can no longer sit back and wait for Chinese tourists to come to their destination and buy their globally hot-selling products. They have to actively court this consumer and create connection points for new collections and products.
Celebrity and KOL collaborations remain the most direct path to make these connections. As research firm L2 found, social media posts on Chinese platforms that mention a celebrity account for 96 per cent of all fashion brand engagement on Weibo and 88 per cent of watch and jewellery engagement.