What is the winning formula to capturing Chinese travellers’ hearts?

With the fears of the pandemic slowly easing, an air optimism has taken over the travel retail industry in China.

In fact, even many global markets were suffering from the pandemic, the Chinese market remained resilient. This can be attributed to the shift of domestic tourism, government duty free initiatives in the Hainan province, and other Chinese travel retail trends in 2021, captured by “Chinese Travel Shoppers 2022 Whitepaper” jointly published by iClick and EY (the “Whitepaper”).

The Whitepaper said that currently, Hainan Free Trade Port (FTP) is on track to becoming the world’s biggest duty free market[1], as well as is currently the largest special economic zone (SEZ) in China[2]. Under the Master Plan for the Construction of Hainan FTP, the modern industrial system highlighted three sectors that will be extensively developed: tourism, modern service, and high-tech industries.

What this means is that marketers and brand owners can leverage Hainan’s unique development, new policies, and its geographical advantages for upcoming opportunities for FTP investments, ranging from yacht tours to digital tourism. What also sets Hainan apart are aspects such as the continuous building foundation for a law-based business environment and the continuous implementation of integrating system innovations that centred on the business environment.

But to really resonate with Chinese shoppers, marketers out of the market must first understand them.

So, who are the Chinese travel retail shoppers?

According to the Whitepaper’s findings four key types of domestic travellers really stand out in the Chinese retail scene.

These are the families, the solo folks, the small-town youth, and the Sanya traveler. With the integration of 5G, big data, and AI within the tourism industry, a substantial transformation of domestic travel in China is likely to thrive even after the pandemic is “over”.

Majority of these shoppers use Xiaohongshu as the top Chinese travel app for research while Meituan is the top travel app for purchases.

New experiences make a difference

Interestingly, one experience that is coming back is the pop up store – which might not be new but is making waves in the retail scene. Many brands, including SK-II and Clé de Peau Beauté, have unveiled pop-up stores in Hainan in partnership with China Duty Free Group to satiate the shopping needs of consumers who have been unable to travel overseas during the pandemic.

According to the Whitepaper, Clé de Peau Beauté’s pop-up store, for example, had live-stream events, exclusive products only available in Sanya, a city in Hainan, a simulator room, as well as QR codes and AR mirrors. These beefed up Clé de Peau Beauté’s pop-up experience, and the live-stream attracted more than 700,000 viewers and 6.4 million impressions on Yizhibo.

Meanwhile, SK-II’s “Social Retail” pop-up store in the Sanya International Duty Free Shopping Complex comprised an AI skin analyser, animated short films, a WeChat mini-programme, and an AR video game. Common themes of successful pop-up stores typically comprise aesthetics, high-tech, personalisation, exclusiveness, and high engagement with customers via social media platforms, the report said.

Panelists at the iClick Chinese Travel Shoppers 2022 event also echoed similar sentiments around consumer receptivity to new experiences and technologies, Loo Cheng Chuan, co-founder and chairman of advertising solutions firm ACCSS. New shopping technologies go beyond just live-streaming, but comprise new shopping apps and business models.

The increased interest in pop-up stores is not the only proof. In fact, Loo said Chinese consumers these days are doing plenty of “virtual travelling” where they watch the live-streams of those who travel overseas, and even live-streams of the products in overseas stores.

At the same time, the pandemic has also brought about revenge spending in China, and the report predicts this to become a major market trend in the next few years. Citing a recent survey conducted by Travel Daily about Chinese tourists’ demand for travel consumption after the pandemic, the report said 39% of respondents predicted there would be a large revenge rebound of travel consumption, and 44% predicted a minor revenge rebound. Only less than a quarter thought their travel consumption demand would either decline or maintain the same as the pre-COVID era.

“Revenge spending and revenge travel is very real,” Loo said. He explained that inbound and outbound travel in China will see “explosive, mega growth” – a trend currently evident in Europe.

Search plays a major role in minds of consumers

In fact, search keywords for outbound destinations include Korea, Singapore, Australia, and Switzerland, while Chinese consumers also searched for local duty free shopping complexes, iClick’s report said.

Likewise, the Baidu International Advertising Unit also found that many of the search terms by Chinese consumers revolved around outbound travel, John Lo, GM of international sales, told the panel. He explained there was substantial growth in outbound travel search since July 2021.

With the preferences of Chinese consumers changing, Lo said it was important for brands to identify who the potential travellers were through the data they have.

“If we can’t do a good job on communicating with customers, your investment will go to waste. Before the pandemic, many advertisers were investing resources in creating the wrong type of content,” he said.

Hence, it is crucial to research the type of content and information that Chinese travellers would like to receive. For example, Chinese consumers prefer travel guides with images and text, but when it comes to information about hotels, food, shopping, and entertainment, they prefer short videos, Lo said, separately referencing a survey Baidu conducted.

Gen Z are the decision makers

Gone are the days when consumers mainly travel to shop. In fact, the up and coming generation – Gen Z – seek other experiences when travelling. Panelists at the iClick event showcasing the Whitepaper also shared that popular experiences among Gen Z include hiking, low altitude flying, and surfing, among other water activities.

Travellers are now looking for more than just a great experience. Their demands tend to be more personalised and they are keen on getting to know people with similar interests. Moreover, travellers today, in general, seek plenty of wonderful experiences. Access to TikTok, Instagram, and Facebook has led Gen Z to want to mirror some of the experiences they see on these social media platforms. Hence, if brands want to capture the heart of consumers, they have to sell experiences rather than products.

Frankie Ho, iClick’s president of international business, said during the panel that marketers needed to “always come up with a gimmick” when targeting this digitally savvy segment.

“If you are a marketer, you need to think of how to attract this younger segment with innovations. They want to have their own style and individuality, so you need to think of 360 marketing campaigns that are good enough to help the younger generation make a choice,” he said.

China is known for its one-child policy, which ended in 2016, and Ho advised marketers not to overlook (only children), in addition to targeting Gen Z. “They are the ones who decide the destination of the family trips, and not the older folks,” he said.

At the same time, Chinese consumers have also turned to buying their items in advance at the domestic duty free stores before their tours. This is usually done via the WeChat mini platform or on Baidu, and this shift came about because they could no longer travel to Europe for their luxury items.

As a result of this digitalisation, Ho said consumers now have more demanding requirements towards travel retail brand owners.

Similarly, Baidu International Advertising Unit’s Lo said the purpose of travel has changed for many consumers. Currently, shopping isn’t one of the most popular purposes for travel among Chinese consumers. However, Chinese consumers are still not reducing their spending when shopping overseas, Lo said, citing a Baidu survey. This means that Chinese consumers are still willing to shop overseas even though shopping is no longer the main intent behind their travel plans.

“If we would like to communicate or connect with potential audiences in the pre-travel stage, we have to do a lot of planning and think of gimmicks to increase the intention on our brand,” Lo explained.

The full Chinese Travel Shoppers 2022 Whitepaper can be downloaded here.

EY has contributed to the Whitepaper in sections 2.3 “Business opportunities in Hainan” and 2.4 “Tax incentives in Hainan”. The material in sections 2.3 “Business opportunities in Hainan” and 2.4 “Tax incentives in Hainan” has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice.

[1] Hainan narrows the gap with Korean duty free
https://www.moodiedavittreport.com/hainan-narrows-the-gap-with-korean-duty-free/

[2] China's largest special economic zone celebrates 20th anniversary
https://www.mfa.gov.cn/ce/celr/eng/gyzg/a123/t429357.htm