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How Brands are Falling in Love With Chinese Tourists

by Li Hui

April 7, 2015

Tourism-650x400

An increasing number of brands are finding it lucrative to woo the growing legions of Chinese tourists—both outside China and within.

During the 2012 Olympics, a series of ads appeared on London’s iconic red double decker buses leaving the Brits baffled. The ads, splashed across 400 buses, featured Chinese individuals—an elderly couple with a passion for backpacking, a retiree determined to run a marathon, a basketball player who could no longer play due to a heart condition, and a cycling team that had cycled from China to London. The taglines were in Chinese characters. And even more baffling, the brand being advertised—Yili Dairy, an Inner Mongolian dairy producer—isn’t even available in the UK unless you count the stray imports available in select stores in China Town.

Why then would such an awkward advertisement appear in London? According to Ogilvy & Mather, the agency that created these ads, the campaign aimed to tell the world that the Chinese are now paying extra attention to their well-being and that they have the upbeat ‘Olympic Spirit’. But that still doesn’t explain how that would help Yili, the brand that poured in the big bucks into this campaign.

There is a rather convoluted logic behind this. Let us explain.

Yili’s target was not the average British consumer and definitely not the immigrant Chinese. Yili was looking at the hordes of Chinese tourists who came to London for the Olympics. The idea probably was that seeing Yili advertise in London would convince them that the brand was very good, and they would be more inclined to buy it back home in China.

China’s outbound tourism has experienced explosive growth in the last few years and scores of Chinese tourists are crisscrossing the globe, travelling to places as remote and exotic as Easter Island, Machu Picchu and the South Pole. At a recent press conference, China’s National Tourism Administration indicated that the number of Chinese tourists who travelled outside of mainland China in 2014 exceeded a hundred million for the first time, further consolidating China’s No.1 position as the country that sent out the most outbound tourists. All of this is fuelled, of course, by factors like a still-flourishing economy and a growing middle class with more disposable income.

Seeing the rising ranks of Chinese travelers, many countries have started rolling out the red carpet for them by making visa applications simpler. Japan, for instance, despite its blow-hot blow-cold relationship with China, has lowered the threshold for multi-entry visas for frequent Chinese travelers.

Companies, especially those in tourism-related industries, are hailing this increase because when Chinese tourists travel, they splurge. According to the Market Research Report on Chinese Outbound Tourist (City) Consumption report released by World Tourism Cities Federation in 2014, in 2013, Chinese tourists spent a whopping $128.7 billion, 28% more than the previous year, with the average Chinese tourist spending approximately $1,705 on shopping per trip. A more recent analysis by Bank of America Merrill Lynch says that the 109 million Chinese tourists who travelled abroad in 2014 spent $164 billion. The same report says that by 2019, the numbers of Chinese tourists would swell to 174 million and they would spend $264 billion.

Times Square, Neon Billboards and the Art of Branding

Yili is not the only Chinese brand that has hit upon this novel approach to marketing. Chinese liquor brand Kweichow Moutai also tried this tactic a couple of years back by advertising in London’s listings magazine, ShortList. Once again, the assumption was that Chinese tourist would see the ad and believe that Britishers love Chinese moutai as much as they love their ale, imparting a new sheen on China’s favorite liquor. Another famous Chinese liquor brand—Wuliangye Liquor—tried the same tactic by splashing on a big outdoor ad in New York’s iconic Times Square. No stranger to Chinese brands, Times Square has also seen ads from China’s Xinhua News Agency and Erdos Group, a company from Inner Mongolia.

And it is not just ads. Some Chinese companies are also setting up stores abroad—the motive curiously is not to sell to foreigners, but to enhance their brand’s image in the eyes of Chinese travelers. Oxford Street, London, arguably Europe’s busiest shopping street, saw Chinese down clothing maker Bosideng open its first foreign store the day before the 2012 London Olympics. Chinese sportswear brand Li-Ning also briefly established a presence in the US with a store in Portland but it was eventually shut down.

Kunal Sinha, formerly the Chief Knowledge Officer and Regional Cultural Insights Director at Ogilvy, believes that Bosideng is not necessarily trying to persuade UK shoppers to buy the brand. Neither are shoppers from China buying Bosideng in London. The chic building on Oxford Street with its bold Bosideng signage is sending a subtle message to the Chinese tourist that the brand has ‘arrived’. “It falls into the ‘sending signals [category]’,” says Sinha, who has lived and worked in China for nine years. “The actual shopping happens back in China, not overseas. This is ultimately [about pride in culture].” Similarly, advertising on Times Square hints that a brand is ‘accepted’ in the West.

At some level, Chinese brands are also riding piggyback on the idea of the ‘Chinese Dream’, a term that has come to stand for building a prosperous society, rejuvenating the nation and stoking patriotism among citizens. The assumption is that seeing a domestic brand selling or advertising in a posh neighborhood abroad will invoke a sense of pride among citizens. As Maneesh Choudhary, Head of Client Service and Solutions at Millward Brown, puts it, seeing Chinese brands outside the country will enable the Chinese tourists to “link back” to their own dream which is about having a country that is not only prosperous, but also a global superpower.

For Chinese brands is the investment worth it?

In some cases, it might well be even though the benefits may be more at a perceptual level, and are hard to quantify. Chinese consumers have an interesting psyche: they are both brand conscious as well as price conscious. It shouldn’t shock you to see them eat 3 Euro stir-fried rice out of takeout containers in the hallowed corridors of the luxurious Galeries Lafayette Paris—just after they splashed thousands of Euros on diamond-encrusted watches and Hermes bags.

They may scrimp on routine everyday things, but when it comes to things that help them make a statement, show their individuality or convey a certain image, they go all out. “On a scale of 1-10, brands are at 8 in terms of how important it is to Chinese consumers,” says Sinha. “If the brand enhances their image, they are happy to pay some extra for the brand.” Given that brand reputation is such an important factor, companies are willing to spend an extra penny to give their brands the added edge.

A Growing Niche for Tailormade Services

Yet other Chinese companies have found a unique market in literally following the Chinese tourist across the globe and providing them services that only they can provide best. Take the car rental market. While car rental markets outside China are already very mature, Chinese tourists still face significant hurdles while renting a vehicle, be it language or driver’s license issues, says Ben Lee, co-founder of the Guangzhou-based Zuzuche.com.

Lee found a smart business opportunity here. His company Zuzuche.com has tie-ups with car leasing companies such as Hertz and Europcar to provide Chinese tourists with cars equipped with Chinese language GPS services, driving license translation and portable wifi hotspots. The premise is that some tourists would prefer to drive on their own but it’s not easy given the language constraints.

The smart thing that Zuzhuche did was go in for an asset-light approach, so it has little to lose and a lot to gain. As Lee describes, “[China’s] outbound tourism will continue to heat up in the coming years. Both the government and capital market are pushing this forward. Providing service at the destination has great potential.”

Yongche, also known as China’s Uber, is also busy tapping this opportunity albeit differently. After gaining a firm foothold in the Chinese market, Yongche took its services to Los Angeles and New York, two of the most popular destinations for the Chinese outbound tourists. However, Yongche has no ambitions of going head to head with the likes of Uber in the US. “We focus on providing local transportation services to local Chinese tourists,” Zhu Yueyi, co-founder and Vice President of Yongche, told CKGSB Knowledge in an interview earlier this year. Unlike Zuzhuche, Yongche owns the cars and all its drivers speak fluent Chinese. Starting from two global cities, Yongche is now present in 26 cities across four continents. Tokyo, London and Sydney are some of the new cities it has added to its roster.

Foreign Companies Vie For a Piece of the Pie

In 2011, Harrods, the UK-based department store, installed UnionPay terminals at their checkout counters, which was a first for this rather high-brow store. In a press release, Harrods said that it now had “75 dedicated point of (UnionPay) sale terminals at its world famous Knightsbridge store and a further 8 eight at its Airport terminal branches”.

Payment service providers Visa and MasterCard, that are pretty much the standard across the world, have a miniscule market share in China due to the overwhelming dominance of the Chinese standard UnionPay, which has over 4.6 billion bankcards globally in total. And if western retailers want Chinese travelers to spend money at their outlets they need to make it convenient for them to pay. After all, Chinese tourists have ranked the highest in the global tourism expenditure ranking since 2012, according to a UNWTO report. Riding on China’s tourist boom, UnionPay has already established its present in 140-plus countries and regions across the world.

For Harrods, the special attention being bestowed on Chinese tourists seems to be paying off. When Britain’s Prince William visited China last month, he was accompanied by the managing director of Harrods. That was hardly a surprise because according to some accounts, £1 in every £5 spent by Chinese tourists in the UK is now spent at Harrods.

Other Western retailers are taking to Chinese social media to advertise. US department store chain Macy’s rolled out a curious campaign on Weibo, commonly known as China’s Twitter, on November 11th (also known as Double 11 or Single’s Day, a shopping gala). Those who participated were eligible for a lucky draw that gave the winners ‘Double 11 VIP Gift Bags’ containing discounts, vouchers and free gifts. This was clearly a tactic to attract the Chinese to their stores—7,000 miles away from home and on the other side of the Pacific Ocean.

Then there are the basic services at the location itself, that are increasingly being molded for the Chinese. Museums across Europe are now printing literature in mandarin. Shops (including Harrods), restaurants and hotels across the world are hiring Mandarin-speaking waiters and staff.

And some hotels have launched special programs especially for Chinese tourists. International hotel chain Hilton’s Huanying Program (huanying means welcome in Chinese) is a package aimed at training personnel and tailoring services to cater to Chinese guests. When it first launched the program in 2011, 30 Hilton properties in 13 countries signed up. Today there are “more than 110 participating properties in more than 30 countries and 65 cities popular among Chinese travelers, including Tokyo, Seoul, London, Paris, New York and San Francisco”, as per a Hilton fact sheet.

So the next time you travel somewhere, don’t be surprised if you see congee, noodles and dim sums in the breakfast buffet.

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