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January 15, 2014

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Luxury brands step up battle for travelling shoppers

Source: Agencies | January 15, 2014, Wednesday | Print Edition

Luxury brands are stepping up the battle for travelling shoppers with more outlets at airports and on cruise ships, tapping into one of the fastest growing sections of the market that looks set to keep booming thanks to soaring numbers of Asian tourists.

Revenues from travel retail, which also includes sales on airplanes, rose 9.4 percent in 2012 to US$55.8 billion, according to a market study by Generation Research. It should reach US$60 billion in 2013 and nearly double in size by 2020, the study forecast.

“This channel is becoming very important,” Bruno Pavlovsky, chairman of Chanel’s fashion business, said. “Customers are spending time in airports where the environment has become increasingly sophisticated.”

The French luxury brand, the world’s second-biggest behind Louis Vuitton by sales, has boutiques in four Asian airports and one at London’s Heathrow, and this year will open a boutique in Paris Roissy Charles de Gaulle airport and another in Dubai.

Kering’s Gucci, which like mega-brand rival Louis Vuitton has suffered a slowdown in the past two years partly due to emerging market shoppers’ growing preference for logo-free products, has opened boutiques in the same locations recently.

Tourism spending is up 12 percent worldwide since last January while spending by Chinese tourists in Europe is up closer to 20 percent, according to data from tax-refund company Global Blue.

Chinese tourists, who barely featured in luxury brands’ customer statistics a little over a decade ago, now make up 29 percent of global luxury spending, consultancy Bain & Co said in a recent report.

That trend is set to continue, with Boston Consulting Group (BCG) forecasting nearly half of all air traffic in the medium term will come from the Asia Pacific versus 37 percent now.

Though most luxury brands raised prices, particularly in the euro zone and in Japan, to make up for currency moves, Bain estimates that over two thirds of luxury spending by mainland Chinese was made overseas in 2013, due partly to local duties. According to Renaissance Capital, Europe remains the cheapest market for handbags with price 9 percent below those in Hong Kong and 28 percent below China’s mainland, while the yen’s weakness has played in favour of luxury shoppers in Japan.

BCG expects the Chinese travel market will grow at a compound annual rate of about 11 percent from 2012 to 2030.

Chinese urban travellers took about 500 million domestic and outbound trips in 2012, spending about US$260 billion, and it expects those numbers to increase to 1.7 billion trips and US$1.8 trillion in spending by 2030.

LVMH, which owns Louis Vuitton, is planning to launch in 2016 a new retail concept called Galleria, specially designed for travel luxury shoppers, first in Venice and then perhaps in Paris.

 

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