Tax refund specialist Global Blue has sealed a deal with Alipay, the Chinese online payment service provider, which will enable Chinese tourists to be reimbursed their VAT refunds directly into their Alipay accounts in their home currency.

 

According to Global Blue data, Chinese tourists are the biggest tax-free shoppers in Europe (for the sixth consecutive year), with sales up +20% in 2013 compared to 2012. Chinese tourists represent 27% of Global Blue’s tax refunds.

 

The partnership – staring on 8 July – initially covers four markets in Europe plus South Korea – the biggest duty free and travel retail market in the world. Global Blue’s new CEO, David Baxby (below left), who joined in April, tells TRBusiness that the target in South Korea is not the downtown duty free stores – such as those run by Shilla and Lotte (where taxes are already deducted) – but department stores and other shops in the High Street where they are not.

 

The four markets covered in Europe are the core Chinese destinations of Germany, France, Italy and the UK. In total, including South Korea, some 5,000 retailers will be involved including luxury department stores such as Harrods in the UK, KaDeWe in Germany and La Rinascente in Italy.

 

Commenting on this new extra payment channel, Baxby, a former co-CEO of Virgin Group, says: “Consumers will benefit from the speed and the convenience. Alipay occupies a unique position in China, particularly with young, savvy and independent travellers who increasingly shop at stores in Europe. We think this service has particular appeal to that group.

 

“So we are getting ourselves ready to generate as many transactions as possible and do it seamlessly through this partnership. It offers hundreds of millions of Alipay users a simple and convenient channel to receive their VAT refunds on their purchases made abroad.”

 

“This milestone collaboration makes it easier for merchants to better meet the growing spending needs of Chinese consumers,” adds Sabrina Peng (right), President of Alipay International. “We are confident that it will create a more enjoyable and convenient overseas shopping experience for Alipay customers.”

 

DIRECT CURRENCY BENEFIT

Forms still have to be validated at airports in the country of purchase, but Chinese shoppers will now have the convenience of the refund going directly into their Alipay account.

 

So will the consumer see a financial benefit because of fewer currency translations? Baxby comments: “It’s hard to make specific guarantees, but in general, yes. We are also giving consumers the refund back in the form that they want it, and far quicker. Essentially, we are focused on making this process as easy as we can.”

 

Compared to a US dollar-denominated credit card which can take two months to refund, Alipay will take 15 days. Baxby also notes that compared to a refund on a US dollar-denominated credit card, an Alipay customer will go through fewer (currency) steps to see their refund in their own currency.

 

More countries are expected to roll out the service in the coming months. “This is the first step of a longer partnership,” says Baxby without naming the additional markets. “We will be spending a lot of time and money educating shoppers and merchants and airport staff to ensure that Alipay is well known as a channel and we think that as more people become comfortable with it, usage will grow.”

 

THE REFUND PROCESS

Alipay accounts will be integrated into Global Blue’s three-step process. Consumers buy their goods and get a Tax Free Form at the point of purchase (or swipe their Global Blue Card and receive a pre-completed tax refund form containing all their details); then they have it stamped when leaving the country; and once they have entered their Alipay account number on the form and dropped it in a Global Blue mailbox at the airport, or handed it in at a Global Blue refund office they will get the refund.

 

Chinese travel shoppers are Global Blue’s biggest spending nationality, racking up an average of €815 ($1,108) per transaction (based on their processed VAT refunds). The UN’s World Tourism Organization estimates the number of Chinese tourists to double to 200m by 2020.

 

[Alipay is an associated part of the Hangzhou-based Alibaba Group of Internet-based e-commerce businesses that is currently going through what is expected to be the largest ever tech IPO – bigger than Facebook-Ed.]