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- 18 Jul 2012
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Which Nationalities Are Spending What Where: Global Blue


Manelik Sfez, VP Partner & Corporate Marketing at Global Blue, explains why Brazilians and Indonesians are set to be the two biggest travel spenders behind Russians and Chinese

Thirty years ago, Global Blue introduced the concept of Tax Free Shopping and now commands the world’s largest network of refund points, servicing over 55,000 travellers every day. Though the company has since diversified into providing market intelligence, facilitating direct promotions, currency management and even publishing, tax-free shopping remains its core product. And one of the most relevant marketing channels for luxury goods today.

“Our tax-free shopping service enables people outside the European Union to go to virtually every country in Europe – as well as places like Singapore and Lebanon – and to claim back the sales tax on their purchases,” explains Manelik Sfez, VP Partner & Corporate Marketing of Global Blue. “So in that sense, it promotes international shopping by encouraging people from places like China, to come to Europe and Singapore and purchase luxury goods, where they are looking at an 18-20% reduction in price.”


 France, Italy, Singapore, Germany and the United Kingdom are the consistent top five destinations for tax-free shopping 


“The destination countries remain reasonably static,” reveals Manelik, who cites France, Italy, Singapore, Germany and the United Kingdom as the consistent top five destinations for tax-free shopping. “When you talk about luxury goods, a large part of the attraction is to see the home of the brand and to experience the heritage. This is particularly important for Chinese and Russian consumers.”

“Change will depend on negotiations,” he continues, “which take place at a very senior level between Global Blue and local governments, as to whether or not they are prepared to change their system to accommodate tax-free shopping. But essentially it remains a flow from East to West, with Singapore being the major exception.”

The most recent launch comes in Japan, where an agreement has been reached with department store Isetan Mitsukoshi, to provide the tax-free service in Shinjuku, Ginza and Nihonbashi stores. “This will be a major draw card for Chinese shoppers visiting Japan,” suggests Manelik. “Though I wouldn’t expect this to have a great impact on say Europeans visiting Japan, as shopping is not generally the primary reason why they travel there.”


 Russian & Chinese tourists account for almost 40% of global tax-free spend, followed by Japanese and Indonesians 


But for the Chinese and Russian tourist, shopping, more often that not, is the primary reason for travel. A mix of competitive prices and wider range selection in Europe, alongside the cache earned purchasing luxury goods in their home country. The two traveling segments remain by far the most significant when it comes to global tax-free spend, each accounting for approximately 20% of the global total, according to in-house Intelligence research conducted by Global Blue.

“The next biggest alternates depending on the month between Japan and Indonesia,” confirms Manelik. “Each account for approximately 4 or 5%, so clearly there is still an enormous gap.”

“Japan for all the talk of its decline, its actually steady and up quite sharply in the last year. But because the other countries are growing so fast, relatively speaking it is going down the charts. Some months now, Thailand is in the top 5, meaning that a lot of the time, the Thais are spending more than the Americans.”

“Just to give you some examples, in 2011, Taiwan was 38% up on the previous year, Thailand by 29%, Malaysia by 33%, Australia by 23% and Singapore – talking outbound and not as a destination – was 41% up on the previous year. But when you look at a country like the United States, growth remains broadly flat, as does Japan.”


 Considering how many American tourists come to London, Paris and Rome, when compared to emerging segments, their spend is extremely low 


“Considering how many American tourists come to London, Paris and Rome, when compared to these emerging segments, their spend is extremely low. But obviously there is no shortage of retail in the U.S. and they come to Europe for different reasons – cultural reasons, to see the countryside, to visit tourist attractions – not necessarily shopping. It’s a completely different kind of tourist to the Chinese and Russian tourist.”

Manelik concedes that the Chinese continue to dominate the global travel trade, likening their retail planning to that of a military operation. “With the Chinese shopper, most purchasing decisions are made before they leave home,” he explains.

“They have detailed lists which they have compiled using the Internet, of style numbers, colours and strategies and timetables. They buy for other people and they know exactly what they want. Therefore much of our business is trying to ensure they include tax-free stores in their itinerary at the planning stage.”

When pressed about the next most important set of travellers, Manelik rapidly identifies the importance of Brazil, along with Indonesia. “There has been a little bit of a slowdown in the past few months but we have seen very large increases for many years now in Brazilians coming to Europe.”


 Brazilian and Indonesian tourists will be the two most important nationalities in tax-free shopping in the coming years 


“Culturally they don’t have many difficulties in Europe as many Brazilians are of Portuguese, Spanish or German heritage. And we have seen as the Brazilian economy grows, despite recent stalls, that more and more are coming to Europe and they will want luxury goods, as they are currently very poorly served when it comes to the retailing of luxury goods on a local level.”

“When you think about China and Russia, generally the main cities have stores for all the major brands, whereas in Brazil they don’t and apparently it is very difficult for the brands to set up business there. And even when they do, they are still competing with the United States where it can be just as cost effective to travel to shop.”

As we speak I can’t help but wonder what impact the Internet has had on their business. Technology has certainly been turned to their advantage, where travellers to Finland, Lebanon and Singapore can now swipe a card at customs to receive all their sales tax refunds electronically. But in the age of trawling websites and leveraging the best of currency fluctuations, do people really need to travel these days to take advantage of such benefits?


 One of the things about tax-free shopping is, obviously, you cannot do it online. You have to physically take the goods through customs 


“We have seen a lot of evidence that consumers do look at the different prices online,” concedes Manelik, “but people are also working out the tax differences and altering their travel plans depending on where they think they can get the best bargains.”

“But one of the things about tax-free shopping is, obviously, you cannot do it online. You have to physically take the goods through customs yourself. So whilst people may be able to navigate and leverage some currency fluctuations online, on a mass scale they are not necessarily threatening tax-free shopping.”

“Again lets take China as an example. I’m not 100% sure if Net-a-Porter deliver to China, but if they did and were selling at the same price point as Europe, it would be much cheaper than purchasing locally. But that said, if they physically came to Europe to buy the goods, they would still be able to get another 18-20% off.”

“But pricing aside, particularly for the Chinese and Russian consumer, part of the status story and the cache is not just the goods, it is the story they can tell when they return. For these consumers, very little beats the story of going to Louis Vuitton in Paris, going to Burberry in London or Valentino in Rome.”





To further investigate the upwardly mobile luxury consumer on Luxury Society, we invite your to explore the related materials as follows:

- The Growing Complexity of The Chinese Shopper
- Luxury is Now for the Masses and the Classes
- Surprising Resilience in Japan’s Luxury Market


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Global Blue are experts in international traveller shopping and spending, making transactions between merchants, banks and international shoppers more rewarding

global-blue.com
luxurysociety.com/global-blue