Residents of lower-tier cities are beginning to drive growth
August 18, 2017
NEW YORK (August 17, 2017) – The number of Chinese tourists traveling overseas, especially residents of lower-tier cities in China continues to grow and drive retail spending globally, with the number expected to reach 192 million and spending to hit US$458 billion by 2021, according to “Deep Dive: Chinese Outbound Tourists-More Diverse, More Sophisticated,” a new report from global think tank FGRT (Fung Global Retail & Technology). But the makeup of the travelers themselves is changing, and retailers and brands must respond to Chinese shoppers who are more interested in fulfilling family needs than in buying the latest luxury item.
In a shift from previous years, much of the current growth in outbound travel is being driven by newly affluent residents of lower-tier cities, says FGRT’s third annual proprietary survey of Chinese overseas tourists’ travel and spending habits. The survey was jointly conducted with China Luxury Advisors. Tourists from lower-tier cities spent an average of US$2,449 on their most recent overseas trip, 10 percent more than their peers from tier-1 cities, the survey said. Frequently, these travelers are making purchases on behalf of friends and family at home, possibly driving these higher figures.
“As the market landscape for Chinese tourists transforms and becomes more sophisticated, brands and retailers need to adapt and update their marketing strategy continuously in order to engage this large and growing market of consumers,” writes FGRT Managing Director Deborah Weinswig. “With the rising affluence of citizens in the lower-tier cities and better air connectivity to overseas cities, retailers and brands should not overlook these travelers from the lower-tier cities.”
On average, Chinese tourists travel twice yearly, and are expected to spend a combined $315 billion in 2017. Retail purchases accounted for 55 percent of tourists’ spending on their most recent trip, with clothing, footwear and accessories (including handbags) the most popular spending category, accounting for 75 percent of respondents’ retail outlays, followed by food and beverages (15 percent), sightseeing (11 percent), and entertainment (10 percent).
“Chinese outbound tourists have evolved into experienced and sophisticated travelers,” Weinswig writes. “China is an extremely large and active consumer marketplace, with a myriad of media and marketing choices that can be both overwhelming and expensive. It is critically important for overseas retailers and destinations to choose their marketing methods carefully in order to target the smaller segment of the population that is likely to travel to their tourism destination.”
Japan is the most popular destination for Chinese outbound tourists, visited by 55 percent of those surveyed in the past 12 months, followed by Hong Kong (35 percent) and South Korea (27 percent). Europe accounts for 16 percent of travel among those surveyed, followed by the U.S. at 9 percent.
Security is the top priority when choosing a destination, cited by 96 percent of respondents as an important factor. Chinese travelers are already favoring destinations in Eastern Europe, Northern Europe and the U.K. over Western European destinations. Those who opted to travel to Hong Kong, Japan and South Korea regarded the shopping variety at those destinations as additional important factors.
More than three-quarters of tourists (77 percent) traveled with a spouse or partner on their last trip abroad, and 32 percent traveled with a spouse and children.
“Retailers and brands can consider designing their stores as a family-friendly location. Catering to the needs of both adults and children may help to attract these customers,” Weinswig writes.
Data were collected via an online self-completed survey conducted from May 31 to June 6, 2017. All respondents were Mainland Chinese residents aged 18 through 59 who had taken at least one overnight overseas trip over the preceding 12 months.
The full report can be found here. Other recent reports issued by FGRT include: “Alibaba Group: From Strength to Strength-An Overview of the Business Units of the World’s Largest E-Commerce Company,” “Deep Dive: Aussies, Get Ready for Amazon!“; “Deep Dive: US Consumer Survey-Amazon Prime Members Love Shopping Offline Too“; “Fast Fashion Speeding Toward Ultrafast Fashion“;and the “Deep Dive: The Mall Is Not Dead” series.
FGRT (Fung Global Retail & Technology) is a think tank whose research team, based in New York, London and Hong Kong, follows emerging retail and tech trends, specializing in the ways retail and technology intersect, and in building collaborative communities.
The team, led by Deborah Weinswig, former top Wall Street and retail tech analyst and startup advisor, publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omnichannel retail, luxury and fashion trends, and disruptive technologies. More information can be found at www.coresight.com.