Tax free spending growth by the Chinese has been dropping, as TRBusiness has documented, but new data suggest that it is now much lower than the growth in the number of transactions.

 

According to tax free refund specialist Global Blue, the Chinese are spending far less per in-store transaction on average, even though their transactions in the second quarter were booming: +46% in April, +24% in May, and +29% in June.

 

Referring to the European tax free market, Global Blue says: “There is evidence that the previous mainstay luxury brands no longer dominate to the extent that they used to, and that Chinese shoppers are opting for less expensive brands and retailers. Their tastes are developing and they no longer need the security of big name brands.”

 

Travel retailers and suppliers will have to adapt to a less wealthy wave of Chinese tourists travelling abroad in order to get the most benefit from an emerging ‘volume shopper’ profile. While this could be bad news for luxury conglomerates such as LVMH, Richemont and Kering, the good news is that the Chinese still dominate the ranking of travel shoppers.

 

SHARE UP, BUT SLOWDOWN FROM +50% to +10%

According to Global Blue the Chinese now account for 32% of total spending on tax free shopping – their highest ever share. In Q3 2014 (June to September), total spending by the Chinese rose by +10% year-on-year over the same period in 2013.

 

Nevertheless, this is a considerable slowdown in growth compared to previous years. In 2010 for example, total spending on tax free shopping by Chinese globe shoppers rose by +81% over 2009, and growth continued at +30 to +50% until 2013, when it began to fade.

 

Global Blue says: “What is happening is that more and more Chinese people are travelling, and inevitably, the profile of the people who reach Europe are moving from upper middle class to (relatively) ordinary middle class. Of course we are still talking top 3%.”

 

CHINESE OVERTAKE RUSSIANS

In terms of number of transactions, it had been the Russians who led the market due to their penchant for fashion items [which command a lower average price] whereas the Chinese were buying higher priced categories such as watches and jewellery

 

By June this year, the Russians were overtaken by the Chinese. This reflects not just the new, more volume-driven wave of Chinese travellers, but the fact that the overall spending of Russians has plummeted: -24% in April, -22% in May, and -19% in June.