Tuesday, June 25, 2013

Outlet Malls Draw Chinese Shoppers

  By Jason Chow and Wei Gu - June 24, 2013, 1:03 PM blog.wsg.com

Well-heeled Chinese shoppers have been visiting Dior and Burberry stores in New York, Paris and London for years. Now, the luxury brands’ locations in Woodbury Commons and other suburban outlet malls are seeing some foot traffic as well.

A May report by Boston Consulting Group said that while Chinese consumers are still shopping, given the shaky economic outlook, they’ve become “more sophisticated with bargain-hunting.” Combined with a population that is traveling overseas in greater numbers than ever before, retailers and mall operators say they’re seeing a shift to the lower-priced merchandise that most outlets specialize in.

“In the past 24 months, the Chinese have become very dominant,” said Scott Malkin, chief executive at Value Retail, whose nine outlet malls in Europe carry brands such as Gucci, Prada, Versace and Hugo Boss.

The number of shoppers from China rose 49% during the first three months of 2013, compared with the same period a year earlier, and exceeded the number of shoppers from Russia and the Middle East. Chinese shoppers now make up a third of tax-refunded sales for international tourists, Value Retail said, up from just 18% five years ago. They’re big spenders too: Chinese shoppers, on average, splurged €347 (about $455) at the outlets, the company said, 12% more than the average shopper. Five years ago, Chinese shoppers spent just €254, or 9% below the average spend.

“Chinese consumers will take a picture with a smartphone in the store, send it back to a friend in Beijing or Shanghai and get a message back and say ‘yes, that’s the item,’” said Mr. Malkin of Chinese shopping habits. “It’s real-time communication.”

In the U.S., outlet malls are seeing a similar uptick. Ann Ackerman, marketing director at AWE Talisman, said the company’s outlet malls near Las Vegas, Niagara Falls and other locations were visited by more than 140,000 Chinese tourists in the first half of 2013 alone, compared with 106,000 all of last year. She estimated that the shoppers, who often arrive by the busload, spend 50% more than their counterparts from other countries.

In response, AWE Talisman is converting a Japanese restaurant into a Chinese buffet at its Las Vegas location. “They’re efficient tourists,” Ms. Ackerman said. “They know what they want, and the buffet is a perfect environment. They can eat quickly and go back shopping.”

Indianapolis-based Simon Property Group SPG +0.31%, which runs 63 Premium Outlet and other outlet brands across the U.S., said Chinese tourists are “the fastest growing international segment.” The company courted Chinese tour operators in 2006 to have its stores included on Chinese trips, and coordinated with Chinese banks and credit card companies, including China Merchants Bank 600036.SH -0.09%, to facilitate transactions. Simon said it’s now considering Chinese New Year promotions at several of its locations.

Low prices remain the main draw for Chinese travelers. In May, on her visit to the U.S., Irene Wang of Shanghai spent more than $1,600 at the Great Mall outlet near San Jose, Calif., mostly on clothes for her family. “I should have bought more,” she said, adding that prices were often one-third of what she’d pay in Chinese department stores and even lower than the reduced sales prices of U.S. department stores. While some outlet stores attract criticism for dated looks, what she saw “looked perfectly fine to me.”

“I plan to go back to America every year to shop,” she added. “All the money I save will be enough to buy a return ticket.”

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