The second day of last week’s China’s Century Conference in Shanghai was similarly stimulating to the first, with several stand out presentations.

 

Of course, this was preceded the previous evening by a Gala Dinner event in the Jing An Shangri-La grand ballroom, sponsored and hosted by DFS Group and its Head of Global Business Development, Andrew Ford.

 

This was extremely well attended in a very nice atmosphere, reflecting the very friendly mood amongst attendees, with the only brief formalities consisting of a few cordial words of thanks to DFS Group from TFWA President Erik Juul-Mortensen and a rare appearance on stage by the usually low profile Head of Global Business Development Andrew Ford.

 

Ford was characteristically brief and to the point, both welcoming and thanking delegates for attending. He added a few words about DFS, pointing out that it transacts with more than 200m customers a year, with many frequenting its shops in Hong Kong, Macau and Hainan in China, plus the retailer’s other shops around the world.

 

He said the growth of DFS’ brand and airport partners had also been tremendous in these areas and this had contributed strongly towards a huge increase in the size of its business in recent years.

 

Ford concluded by saying that DFS is delighted with its sponsorship of this type of event and he thanked APTRA, TFWA management and its permanent staff, plus President Erik Juul-Mortensen for putting on the China event, which he said ‘is really important’ and ‘will help grow the business’.

 

 

The second day’s morning session began with ‘Strengthening China’s commercial centre’ – a presentation centred on the five-year plan by Shanghai’s Municipal Government to prepare China’s commercial capital for more economic development. Gu Jun, Deputy Director of the Shanghai Municipal Commission of Commerce addressed the audience on this scene-setting presentation.

 

He said the city of Shanghai is to extend its Visa Waiver Program (VWP) for 72-hour transit tourists to its port area to capture ‘the increasing number of water tourists’. This development also coincides with the planned opening of the China National Service Corp’s (CNSC) new 3,500sq m downtown duty free shop this November, which appeals to returning Chinese.

 

He added that the city will also benefit from the 114 international destinations served by Shanghai’s airports, with the city receiving 7.913m international travellers and a staggering 268m domestic travellers.

 

 

The next presentation concentrated on ‘New opportunities in Chinese duty free’ and this looked at the 30-year old duty free business that the China National Service Corp has operated in its downtown stores catering to Chinese travellers returning from overseas.

 

CNSC is now poised to take advantage of the Chinese Government’s drive to encourage Chinese travellers to shop at home’, so opening the way for it to open a new 3,300sq m store in Shanghai this November. [First-year sales are projected at $80m-Ed]. In his address, company President Robert Lee explained how the coming years will see a big increase in the company’s business, with several new store openings.

 

As reported by TRBusiness, CNSC has submitted a series of applications to open downtown duty free shops in 15 major cities, including provincial capitals across the country, while it already operates 11 downtown shops, including a flagship outlet in Beijing.

 

The store license applications include proposed shop openings in Jinan in Shandong, Changchun in Jilin, Shenyang in Liaoning, Chengdu in Sichuan and Wuhan in Hubei provinces.

 

The company plans to make more store applications when this list is approved and hopes to eventually operate 40 downtown shops all over China with annual sales of RMB.10bn to RMB.12bn (US$1.6bn to $2bn).

 

See also exclusive news story at this link: http://www.trbusiness.com/regional-news/asia-pacific/cnsc-revives-df-sales-to-returning-chinese/

 

The next address concentrated on ‘The Chinese luxury market in the mobile internet era’, where the questions were posed: to  what extent will e-commerce become the retail channel of choice for Chinese customers and how will luxury brands need to change their marketing techniques to succeed in the mobile era?

 

The man left to provide the answers was Professor Liu Dehuan, Vice President of the New Media Institute at Beijing University and an expert on marketing and mobile consumption trends in China.

 

His presentation was very informative and backed strongly by data and this led nicely into the next session dealing with harnessing China’s social networks, such as Baidu, WeChat,

 

 

Weibo and others. He concentrated on how these networks increasingly influence the purchasing decisions of Chinese customers and beyond.

 

It also looked at how the travel retail industry can play this to its advantage, under the careful guidance of Olivier Verot, founder of specialist Shanghai agency Gentleman.

 

 

 

 

The lunch period was then followed by a session entitled: ‘Shanghai Free Trade Zone: breaking the barriers to investment’. This looked at the implications and opportunities for foreign companies created by the first free trade zone in mainland China.

 

Explaining how the initiative will influence the way China allows foreign investment was  Zhu Min, Deputy Director of Management Committee for China Pilot Free Trade Zone, and Mark Schaub, lawyer and expert on the Shanghai Free Trade Zone.

 

Meanwhile, the next speaker, Luca Bastagli Ferrari, the CEO of retail management company Arco Retail. Ferrari complimented Schaub’s effort, suggesting cheekily that it was the first time he had ever heard a lawyer give a marketing presentation well.

 

He then presented on his own subject, entitled ‘Redefining travel retail in China’ and once again concentrated on the theme of the Chinese Government’s drive to promote China as a tourist destination.

 

 

He talked about the Jihua Park project, comprising the development of 35 new leisure, sports and shopping resorts across the country, which Ferrari described as one of the biggest opportunities for brands and operators in China.

 

He also repeated some of the comments he made in an interview with TRBusiness back in January, where he pointed to the planned construction of a series of new leisure destination centres in China, specifically designed to attract domestic holidaymakers.

 

The first two parks are costing $200m each and are being developed by China’s $4.3bn-turnover Jihua Group. These are set to open at the end of the year in Chongqing, a municipality of 33m inhabitants in the south-west of China; and Changchun the capital of Jilin province in the north-east.

 

Parks in Yangzhong, Wuhan and Dongguan will follow, with some 35 leisure destination centres planned over the next decade with the full support of the Chinese Government. All visitors will be able to buy duty free goods – or more precisely a tax free allowance – at these parks and Ferrari and his colleagues have been talking to suppliers for well over six months at the Cannes TFWA show and other locations about the developments.

 

Ferrari told TRBusiness earlier in the year that the initial shopping areas will be between 30,000-35,000sq m in the first phase, to include fashion, cosmetics, leather goods and souvenir shops, as well as restaurants [the latter accounting for about 20% of the space] with expansion to 50,000sq m depending on the success of the project.

 

The Jihua Group also believes it will host between 3-4m annual visitors at each park, with each person spending around €200 ($237) daily.

 

For more information on this earlier interview, click here: http://www.trbusiness.com/regional-news/asia-pacific/a-new-travel-retail-channel-for-china-emerges/

 

 

Next up was the session entitled ‘Chongqing: spotlight on China’s biggest city’, as this examined China’s largest city of 33m people and also home to one of China’s fastest-growing airports. Ahead of the opening of its new Terminal 3 in June 2016, Chongqing Airport Commercial Division Manager Gao Ya Li showed off the plans for the 50,000sq m of commercial space that the new facility plans to unveil in June 2016.

 

Gao Ya Li told the China’s Century Conference last week that Chongqing is China’s largest city with a population of 33m people, which is located on the Yangtze River – the only municipality directly under central government control in West China. The Three Natural Bridge is also a world heritage site at the location.

She added that it is also rated as one of China’s seven best cities in which to invest, according to the Financial Times, with total GDP in 2014 of RMB.1426.5bn ($232bn) and a growth rate of 10.9% – the fastest recorded by any city in China last year. The airport is also developing at a very fast pace.

 

Chongqing is the eighth biggest airport in terms of passenger traffic in China and the fastest growing within the top 10. Passenger traffic reached 29.26m in 2014, representing a 15.8% growth and airport management is expecting 32m passengers this year. This will grow again to more than 35m when the new Terminal 3A comes into service in 2016.

 

Currently the airport connects with 45 international and regional destinations, including Sydney, Helsinki, Doha, San Francisco, Tokyo, Seoul, Bangkok, Singapore and others.

 

The existing retail area consists of 6,500sq m, supported by additional catering space of 7,500sq m (Chinese and western-style F&B) and an airport-wide advertising area of 5,000sq m. Retail consists of local food, convenience store, clothing, accessories, jewellery, cosmetics, watches, bags, toys etc. Retail brands already trading at the airport include Ferragamo, Zegna, Max Mara, Bally, Coach, Swarovski and more.

 

The T3A Commercial Plan gets underway with retail first between June and July 2015, followed by catering in August and advertising in September of this year.

 

Gao Ya Li said the airport will be publicizing the RFPs shortly with the ultimate aim of attracting a good mix of both international and local brands to the new terminal facility. She added that the airport welcomes approaches from any brands interested in establishing a new presence at the location.

 

The Chongqing Airport Group can be contacted at: Tel: 86 2367152358 or Fax: 86 2367823075. Gao Ya Li can be contacted by email at: [email protected].

Curiously, one of the very best highlights of the entire conference also took place as the conference was drawing to a close, with M1nd-set owner & CEO Peter Mohn presenting ‘China’s Century in focus: an exclusive study’ commissioned by APTRA. This looked at insights into Chinese traveller behaviour, tastes, perceptions and preferences and while it was data heavy, it was also well presented.

 

This also saw the welcome return of Michael Barrett, APTRA’s Executive Officer to the role of Moderator, one that he has handled more than capably in the past. This session offered real insights into Chinese buying behaviour that all retailers selling to this nationality can benefit from and TRBusiness will certainly be featuring this in a future issue of the magazine.

 

 

Having said this and been fairly complimentary about most of the presentations, this writer was not particularly impressed with the offering from Haiyan Wang, Managing Partner of the China India Institute however.

 

 

Her experience apparently relied upon 20 years of consulting for multinational companies looking at potential investments in China – with a particular focus on the retail sector. But somehow this presentation just didn’t seem to say much that was new and it lacked the zip that you sometimes need at the end of two engaging days to really keep an audience fully stimulated.

 

The conference was then drawn to a close with final remarks and thanks from TFWA President Erik Juul-Mortensen.

 

[All of the best presentations from the China’s Century Conference will be featured in the April issue of TRBusiness-Ed].

 

THE VERDICT: This was a very good conference and seemingly on a quality level with all other significant industry conferences covering the Chinese travel retail market, if not above. There were some very good presentations on both days and particularly from the Chinese airports themselves, including Beijing, Chongqing, Guangzhou and Shenzhen.

 

A very important key message was also delivered with the Chinese Government’s apparent support for the China National Service Corporation and the Jihua Park projects. Anyone who was unsure whether the Chinese Government wishes to retain duty free/tax free sales inside the country – or tax free allowances to be precise – can now be sure this is the case.

 

Speaker after speaker referred to this trend, which may require some companies to rethink their strategies in future – if they are not doing so already. [This was also a recurring theme when TRBusiness was researching interviews in China in January for the official Delegate Magazine-Ed].

 

Duty paid travel retailing from foreign brands continues to be of big interest for airports in China and also the only avenue for foreign companies at present, considering Chinese law only allows Sunrise Duty Free to operate duty free airport concessions at Beijing and Shanghai Pudong and the China Duty Free Group to operate the rest.

 

There were also some really interesting conclusions from the research conducted by M1nd-set for APTRA which were presented at the end of the second day and these and the best of the rest will all be presented in the April edition of TRBusiness – Doug Newhouse.