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(formerly Counter Intelligence Retail)

We specialize in global traveler statistics, data driven insight, and activating against trends for all major categories sold in duty free and travel retail.

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Will you be caught out by China’s ‘new retail’?

In an age of overflowing information, it is not hard to see why consumers are wising up to value and why some luxury brands do not have the same cache or credibility they once did.

September 2017 | by Garry Stasiulevicuis, President 

The phenomenon has been apparent in western markets for some time with repercussions being felt in domestic High Streets as more price-comparing and shopping gets done online. The luxury-focused duty free and travel retail market may not get off lightly either.

Why? Because the channel may be deluding itself if it thinks it can easily switch from ‘less interested’ western travellers to the never-ending supply of new Chinese travellers pouring out of the most populous country on Earth.

True, the outbound flurry is not going to end – it is going to increase. The China National Tourism Administration forecasts 192m outbound travellers by 2021, up from 122m in 2016.

The numbers are rising but Chinese spending per head may not. The trend of ‘new retail’ in China is here and it is a potential saboteur of high-end goods.      

Amazon and other western online retailers have given consumers the upper hand when it comes to shopping because. They can search for a red laptop, for example, and sort by price, relevance, newest arrival, specification or customer reviews. They can compare and contrast instantly.

A power shift

Many products on Amazon are effectively from ‘no-name’ manufacturers that look similar or even identical to branded products with the same function – bags or electronic items for instance – but at much lower prices. Consumers are willing to trust these no-names, particularly when they have had good reviews from users and are assured about quality. 

This shifts power away from brands – which heavily rely on trust in their name to command higher prices.

In China, ‘new retail’ represents a similar movement. According to GGV Capital’s Hans Tung a key element of it “is selling beautifully designed, quickly manufactured, and frequently iterated products at the lowest prices possible, making customers pleasantly surprised”.

The Chinese already have access to a vast array of competitively priced goods via e-commerce marketplaces such as TMall (run by Alibaba), JD.com or Dangdang. But they are also finding well made and reasonably-priced items in the domestic market with retail brands like Miniso whose lifestyle stores reflect a Japanese-design ethos but without the big prices tags.

In September 2013, the brand – whose logo has similarities to fast fashion house Uniqlo but whose product range is more like Muji – entered the Chinese market. It has opened over 1,000 stores in less than three years, with turnover doubling from $750m in 2015 to nearly $1.5bn in 2016.

Miniso’s combination of – in its own words – “high quality, competitive price and creativity” means that most of its products are priced from $1.50 to $30. It claims to have “earned love from major consumers aged from 18 to 35”.

Well-designed and affordable

These are, of course, the Millennial generation who can be won over by well-designed items that are affordable. In the US, Millennials remain a big focus for retailers for obvious reasons: there are currently just over 75m 18-34 year-olds according to the US Census Bureau. In China – depending on which source you access – this group is anything from 200m to 415m in size.

Whichever number you pick, this demographic is so big that it gets everyone’s attention. There is even a globetrotting conference series – the Millennial 20/20 summits – dedicated to them which looks at the future of commerce from the perspective of a digital-savvy consumer and focuses on key pillars like retail, marketing, mobile, payments, video, social, e-commerce, CRM, advertising and ‘big data’.

Global airport retail is still some way off the mind-set of innovation, disruption and technology as key components of its own future – despite the reality check of failing High Street physical stores and a power grab from e-commerce. A research report by Bain & Company and Farfetch predicts that luxury purchases in bricks-and-mortar locations will drop to 75% by 2025 from 92% in 2016.

This may give comfort to airport retailers – after all it means that physical retail will cling onto three quarters of the luxury retail market. But when it declines from $9.20 out of every $10 spent to $7.50 in less than a decade – the writing is on the wall.

Younger consumer wants to shop, consume content, interact with brands, and make payments in new ways – and often as cost-effectively as possible. CiRl has a regular tracking study in place to assess these changing trends amongst Chinese travelling shoppers. What we already know is that when it comes to Millennials, the online space is where they go first to start interacting – but for DF&TR, this space is largely a black hole. 

For further information, please visit Counter Intelligence Retail.