Luxury REPORT We examine the issues crucial to the luxury market s continued success, including how The Outnet has changed high-end retailing online
WELCOME In the evolution of luxury goods there can be no boundaries or visa issues JAMES KNOWLES Features and special reports editor While the wider fashion sector has been hit by the unseasonably warm weather during September and October, the luxury market has remained robust, much as it did throughout the recession that saw so many businesses falter. And now, as the economic recovery gathers momentum, luxury businesses are looking to capitalise on this to grow even more. Look no further than brands such as Burberry, where total sales grew 14% to 1.1bn in the six months to September 3, which is testament to the fact that consumers will continue to buy quality products from those that put customer service first, even when times are tough. As such, we continue to see a flurry of store openings on London s famous luxury retail parades, with Bally and Longchamp opening on Bond Street, Victoria Beckham unveiling her debut store on Dover Street, and Michael Kors set to open a European flagship on Regent Street in 215. Bond Street will be given a 2m revamp within the next four years, which will change the flow of traffic and increase the pedestrian space by 5%, upping its potential as a global luxury destination. With so much movement in the luxury sector, we bring you our third annual Luxury Report, in association with retail technology provider K3 Retail. We begin by asking Who is the luxury consumer? on page 2. To answer this we have exclusive data from consultancy firm CACI, and home in on three consumer segments to find out their attitudes to shopping. It s not all about the UK, though. In luxury retailers, it s not uncommon to find Mandarin-speaking staff trained to serve affluent visitors from the Far East. However, the UK s restrictive visa system means our luxury retailers miss out on a significant amount of customers that instead opt for the simpler Schengen visa offered by our neighbours in continental Europe. For the latest developments on this issue, see page 9. Traditionally the sector has been reluctant to embrace selling online, but the past few years have seen that change, spearheaded in the UK by Net-a-Porter and its stablemates, designer menswear site Mr Porter and luxury discount site The Outnet. On page 6 we speak to The Outnet managing director Stephanie Phair to find out how the luxury discount market is performing and how she has seen it change. Finally, on page 4, we bring you the findings from our Luxury Report round table, attended by representatives from businesses such as Burberry, Aquascutum and Jigsaw. We hope you enjoy this report, and we d be pleased to hear your thoughts. James.knowles@emap.com Reaching customers across all channels TONY BRYANT Strategic business development director, K3 Retail K3 Retail is again delighted to be associated with another insightful Drapers report. It was great to see a number of leading luxury brands debating the true values of the sector. Traditionally in the luxury sector, product has always been king and customer engagement is now equally as important as the product being sold. Much discussion took place around the importance of consistency across the digital and physical offering. The consensus was that informed store assistants utilising technology and product knowledge was a winning combination, and ultimately joining this up with the web and great customer service delivered better retention rates and increased brand advocacy. We are seeing the emergence of more new concept stores. Burberry s digital store on Regent Street was discussed as embracing all within the luxury omnichannel experience. It was also recognised that the luxury independents with less budget to spend on technology still deliver outstanding service based on strong product knowledge plus an in-depth understanding of their customers. I genuinely feel that UK fashion retailing is driving innovation whether it is via the technology proposition or service-led and British fashion, spearheaded by luxury brands, is renowned the world over for its quality and craftsmanship. I left the round table enthused by the quality of the brands and passion of the people driving those businesses forward. We look forward to hearing your views on the report and are happy to continue the conversation. tony.bryant@k3btg.com CONTENTS 2 Meet the consumer Luxury consumers are changing. Thanks to data from CACI, we reveal who they are and where they shop 4 Round table Luxury goods professionals discuss brand consistency across platforms and exceeding customer expectations 6 The Drapers Interview The Outnet managing director Stephanie Phair on convincing luxury that sales and ecommerce can work 9 Chinese visas Compared with a Schengen visa, the UK process is arduous and UK retailers can lose out to European rivals COVER IMAGE: IRIS & INK Drapers Luxury Report / NOVEMBER 214 1
MEET THE CONSUMER INTRODUCING TODAY S BIG SPENDERS Words by JAMES KNOWLES Luxury trade body Walpole estimates the sector will be worth 12.2bn in the UK in the next three years a promising time for our home-grown businesses. However, the high-end consumer, like all consumers, is changing. Shoppers from emerging markets now figure highly, digital has come to the fore and provenance is key. Using data provided by consultancy CACI, we look at three key groups (see box, far right, to interpret data) and get views on the changing landscape from retail experts. GUY SALTER DEPUTY CHAIRMAN, WALPOLE Looking back on the past 12 months, we have seen a number of significant geopolitical issues, and that uncertainty is impacting on business in London. But taking a longer-term view, we are seeing some interesting trends, including the resurgence of bespoke, a fascination with provenance and growth in digital luxury. Customers are more demanding, as expressed in the resurgence of customisation, but for luxury it is just a return to our heritage in making bespoke pieces and providing truly individual service. If you think of the famous Savile Row tailors, all were founded on truly bespoke service. We see this trend across all categories. Linked to this is a real interest in provenance, in terms of where products are made and the intrinsic associations of Made in Britain, as well as how they are made and the particulars of the materials, sustainable sourcing, craftsmanship and heritage. It is good to see the progress that brands are making in the digital customer experience and the convergence with physical and online retail. Consumers are benefiting from this and driving greater developments and investments in social media, digital marketing and omnichannel retail. TONY BRYANT STRATEGIC BUSINESS DEVELOPMENT DIRECTOR, K3 RETAIL The luxury sector has always been product-focused, but the new standard is how you deliver a great consumer experience. Everyone is working towards a joined-up omnichannel experience. Clienteling a personalised approach to drive engagement is key. Ultimately, the consumer wants a sales person who is engaging. Point-of-sale goes to a whole point-of-service mentality. Promotional management in luxury has to be subtle and it has to be pertinent to the time of year. Loyalty across the channels is where luxury wins. 25 2 15 5 12 8 6 4 2 8 7 6 5 4 3 2 35 3 25 2 15 5 WHO ARE THEY? AGE OF PERSON PRODUCT BOUGHT FOR/BY -4 yrs 5-17 yrs 18-24 yrs 25-34 yrs 35-49 yrs 5-64 yrs 65-74 yrs 75+ yrs GEOGRAPHY COUNTRY OF BIRTH UK England Northern Ireland Scotland EU EU country Rest of country after March Europe pre-march 21 21 Africa FINANCE Annual household income - 2, 2,1-4, 4,1-6, Middle East & Asia North America 6,1-8, Central America South America 8,1-, Wales Caribbean Antarctica & Oceania,1+ 3 2 15 5 2 15 5 HOW DO THEY SHOP? MARKETING CHANNEL Channels responded to Leaflets Mail addressed to householder or occupier DIGITAL ATTITUDES I worry that any personal information entered online will not remain secure INTERNET ACCESS Usage in last week Up to 3 hours 3-8 hours 8-2 hours 2 hours+ SOCIAL MEDIA ACTIVITY At least weekly Access Post links/ content you have found (eg photos/ videos) Mail addressed by name I couldn t live without the internet on my mobile Post/send messages Newspaper/ magazine ads or customer magazines Computers confuse me I ll never get used to them Update your profile (eg pictures/ hobbies) TV/radio Email Text message Update your location (eg Facebook Places) I love to buy new gadgets and appliances 25 2 15 5 Make comments on friends status, photos etc I wait until technology gets cheaper before I consider a purchase View content friends have uploaded (eg photos/ videos) Telephone Use other programs through social media (eg Spotify) We take a look at who the luxury consumer is and how they shop Cinema Shopping online makes my life easier Visit the fan/ profile page of a product/ brand or celebrity KEY This data is on the three highest luxury spending consumer groups (descriptions below), and shows how they shop against a national average of. Lavish lifestyles These are the most affluent people in the UK working as entrepreneurs or in senior management with the typical family living in a home worth more than 1m. City sophisticates A younger affluent consumer group that owns flats in major towns and cities, usually graduates working in white-collar professions. Ownership of ipads/tablets is double the national average. Career climbers Also a younger consumer group, they live in flats, apartments and houses in urban areas that are rented or being bought. They are more likely to have loans and mortgage repayments, but frequently use the internet. All data provided by CACI CONTENT ACCESSED Through internet or apps on mobile phone Local information Shopping Social networks Auction sites Become a fan of a product or brand Search engines Interact with a brand (eg comment on a brand page) Lifestyle (eg Entertainment fitness, cookery) Click the Like button (on a brand/ product/ event etc) Add an app (eg a Facebook or Twitter mobile app) Drapers Luxury Report / NOVEMBER 214 2 Drapers Luxury Report / NOVEMBER 214 3
ROUND TABLE It s all about THE DETAIL Retailers agreed that great customer service is a must in the luxury sector, whether in store or online Words by CHARLOTTE ROGERS Photography by PHIL WEEDON Rather than faltering as the recession took hold, the luxury sector has flourished under pressure, fulfilling demand for quality product that justifies the price tag. Brand positioning is everything, and with the continued rise of multichannel and growing international retail portfolios, consistency is essential across every platform to protect that image. This was the consensus of a panel of leading upmarket retailers at Drapers Luxury Report round table. Held in association with retail technology provider K3 Retail at 3 Pavilion Road in London s Knightsbridge, representatives from the likes of Burberry, Aquascutum and The Shop at Bluebird debated the state of play in the luxury retail market. Discussions kicked off around current trading, and in particular the warm autumn that has hit many retailers sales. Whereas fast fashion is at the mercy of the weather and many high street retailers were hit hard by the mild September, those in attendance said the luxury sector has been more resilient. As soon as outerwear hit the sales floor back in July we were selling 3, coats, said Claire Miles, head of buying at The Shop at Bluebird. We ve had no problem at all and the pattern of shopping, particularly for us on the King s Road, is based on very loyal customers. It s not necessarily about footfall, which you would expect from the high street, it s more about the individuals coming in and the level of service they are getting. The other day we had a customer with an average transaction of 3, who came from Spain because she knows Bluebird. Miles argues such loyalty is down to the sales people on the shop floor inspiring customers through a high level of service and knowledge of product. This opinion was echoed by Mats Klingberg, founder and owner of menswear independent Trunk in Chiltern Street, Marylebone, who reported an incredible start to autumn 14. Earlier in the year, the store benefited from the success of its made-to-measure days, where it collaborated with Italian menswear labels Caruso and Boglioli, selling 35 suits in two days at prices of between 1,5 and 2,. My way of doing made-to-measure is more laid-back, as people can get intimidated by the whole experience, Klingberg explained. It has been a phenomenal success, particularly for a small retailer. Many of our customers are loyal and they come from all over the world. They save their seasonal shop until they come to Trunk. The Trunk customer is not focused on brand name, but fabric, fit, quality and service. Klingberg estimates that 5% of his customers live in London but originate from the US, Europe, South America and Asia, and 5% are visiting the city on business. The Trunk staff are encouraged to know their customers by first name, as a way of building longstanding relationships. This obsession with customer service was echoed by Barbara Horspool, product development director at premium chain Jigsaw. Its sales staff are trained to understand every detail about the Italian fabric on a jacket or the William Morris print on a jumper, even down to the artist s technique with indigo dye. They know the shoes with the stamped sole are made in Northampton and can explain it to the customer, so it may look like a simple brogue, but it has this story behind it, said Horspool. It s about how you build a story into your brand experience. Horspool believes there are two types of luxury consumer and, therefore, two different markets. One customer believes luxury is all in the label and dependent on how much you spend. The other takes an intelligent approach to spending money on beautifully considered items and loves to know the story behind a rare or personalised garment. With 62 stores across the UK, including concessions in John Lewis and Fenwick, Jigsaw has expanded into numerous areas of the country that have affluent local communities, such as Dulwich in south London, as well as locations further north such as Leeds. It is a question of how much interest you put in London and the Southeast versus the rest of the UK, Horspool said. When we had difficult weather we found it affected our London stores way more than our out-of-town stores. There s a local customer who is very loyal to our brand. Forget thinking that a 6 sheepskin coat can only go into London, the demand for beautiful product is nationwide. Manchester-based leather jacket and accessories label Barney & Taylor is bridging the North/ South divide by first launching its autumn 14 collection on its website, reported global sales manager Damon Hill. Because we re a new brand and this is our first season, it seems more difficult to win over retailers based down in the South. The website is one place where we can show ourselves off at a low cost, so we are choosing to launch online in different countries to build the brand s kudos and take it from there, said Hill. It is best for us to build our reputation with award-winning independents to get ourselves noticed, rather than talk to the big store groups. For Alice Stone, creative director of scarf label Lily & Lionel, the aim was always to keep the brand relatively precious. We have a few, beautiful, wellcurated stockists and are in a few amazing department stores like Liberty, she explained. We don t want to be everywhere. If we love a stockist, we wait for it to be the right time. It needs to happen naturally. Approximately 8% of Lily & Lionel s wholesale business in the UK is based in London, with a growing international presence in France, the Middle East, the US, Canada and Australia. THERE IS A DEFINITE APPETITE to go further afield than London for British heritage brand Burberry. Over the past three years it has worked on relocations and expanding undersized stores to ensure it is visible on the right street, in the right city. Tony Bryant, head of business development at K3 Retail, asked how luxury retailers like Burberry ensure their franchises, concessions and airport retail space provide a consistent brand experience. Maintaining one concept across every platform works for Burberry, choosing the materials, finishings and branding for the shopfit, while remaining sympathetic to cultural differences, reported the brand s director of real estate Europe, Adele Reast Duggan, who since the round table has joined Value Retail, which operates luxury outlet centre Bicester Village. For Burberry it is not about the number of stores, but the quality, size and ultimately the brand experience. The Regent Street flagship, for example, is intended to generate the same feel as the Burberry website, with the interactivity and built-in flexibility to create an exciting and evolving brand experience. At another luxury address in the capital, Aquascutum is using its Jermyn Street store to target the brand at an even more premium market, according to branch manager Kathryn Miller. Our customers are really buying into luxury and Aquascutum is going more into made-to-measure. We are also trying to secure another location in London, maybe in the Knightsbridge area. The discussion moved on to how retailers are translating the in-store brand experience online. For Trunk, online is an extension of its Chiltern Street store. The market online is so competitive and all the big players are pumping in money, but when you are a small shop you need to make a profit to stay alive. We don t have a big team to do a lot of editorial and try to be a magazine, so we need to focus on what we can do, like nice photography and good descriptions to give a service as close as possible to the shop. Klingberg sees online as a great marketing tool, meaning customers are more informed about products when they come in store, although an online presence does not always translate into online sales. Almost all the merchandise goes online, although there are certain brands I am not allowed to put on the site, Klingberg explained. I sell British brands on the website that are very popular in Asia, but over there the prices are much higher, so there are restrictions to what I can do. As a website is always open, you must cater for international customers or UK customers shopping through the night, stressed Horspool. She argued that an easy-to-use online platform is essential to give the luxury and premium consumer a good experience. I don t have a lot of time to go online, but when I do I want to do it quickly and I don t read a lot; I look at images, she said. The new currency is time and, if the value you add to your product is time-saving for the customer, you ve added something that is a real luxury. The two worlds of in-store and online have to be seamless. It is all one shopping experience. Domenico Antonucci, sector manager of fashion solutions at K3 Retail, added the consumer does not see a brand as multichannel, and therefore expects the same level of luxury service throughout. Service will continue to be the focus for Stone, who wants every customer to leave with a Lily & Lionel purchase feeling like they have walked away with a story. Miles, in the meantime, plans to make The Shop at Bluebird website transactional next year, introducing exclusive brands and collaborations edited by the team to give the customer a point of difference. The attendees agreed that the luxury sector looks set to continue its strong performance, with service and attention to detail the keys to success. Focused on customers: (left from top) Alice Stone, Lily & Lionel; Tony Bryant, K3 Retail; Claire Miles, The Shop at Bluebird; Mats Klingberg, Trunk (above from top) Domenico Antonucci, K3 Retail; Barbara Horspool, Jigsaw; Adrian Wright, Peel Outlets; Damon Hill, Barney & Taylor ATTENDEES Damon Hill, global sales manager, Barney & Taylor; Kate Morris, project manager, Kay Boardman, senior architectural planning manager, and Adele Reast Duggan, director of real estate, Europe, Burberry (Duggan has since left Burberry to join Value Retail); Kathryn Miller, assistant manager, Jaeger; Barbara Horspool, product development director, Jigsaw; Alice Stone, creative director, and Angela Stone, director, Lily & Lionel; Adrian Wright, leasing director, Peel Outlets; Claire Miles, head of buying, The Shop at Bluebird; Mats Klingberg, managing director, Trunk From K3 Retail Tony Bryant, head of business development, and Domenico Antonucci, sector manager of fashion solutions From Drapers Eric Musgrave, editorial director; James Knowles, features and special reports editor; Charlotte Rogers, features and special reports writer Drapers Luxury Report / NOVEMBER 214 4 Drapers Luxury Report / NOVEMBER 214 5
INTERVIEW STEPHANIE PHAIR OUT FOR A BARGAIN Discounting and etail may not come easy to the luxury sector, but The Outnet s Stephanie Phair has convinced the doubters Words by JAMES KNOWLES Photography by DAVID VINTINER Ascending the escalators into the Net-a- Porter Group headquarters in Westfield London, there is a decidedly The Devil Wears Prada feel with shiny black walls, cream sofas and immaculate offices abuzz with its equally presentable employees. Net-a-Porter was founded in 2 by Natalie Massenet, who is credited with proving that luxury retail can and does work online. She is now executive chairman of the etailer, as well as chair of the British Fashion Council. The group turned over 533.7m in the year to March 29, recording a 23% rise in sales. Over the past year investments have been made in its portfolio of three websites the original luxury womenswear site Net-a-Porter, its discount sister site The Outnet and menswear site Mr Porter, which were launched in 29 and 211 respectively. Drapers is here to interview The Outnet managing director Stephanie Phair, who has steered the offshoot since its inception and has this year been celebrating the site s fifth birthday. The business has marked the occasion by collaborating on archive designs with 17 designers from Roland Mouret to Alexander McQueen and Balmain, as well as teaming up with Victoria Beckham to auction off 6 pieces from her personal wardrobe. Most recently, Alice Temperley designed a 21-piece limited edition collection. It even took a quirky approach to London Fashion Week street style, with Sergio the roving dachshund shoe hunter covering the event. Drapers Luxury Report / NOVEMBER 214 6 Drapers Luxury Report / NOVEMBER 214 7
INTERVIEW STEPHANIE PHAIR Having worked alongside Anna Wintour at US Vogue, of whom she says I learnt a lot from her she has always seen fashion as a business, you might expect Phair to be just like one of the characters from the Hollywood blockbuster, but you d be wrong. Half Argentine and half Canadian, she was schooled in French and grew up in Mexico, Panama, Paris, New York, Washington DC and London. She studied politics, philosophy and economics at Oxford University and began her career working in New York, first for Siren PR agency in 2, before joining Japanese designer Issey Miyake to work on marketing and promotions in 21, and then Vogue in 23. Her first taste of ecommerce came in 25 when she jumped ship to work for start-up preowned bags and accessories website Portero Luxury, before moving back to London in 29 when she took on the role at Net-a-Porter after a number of very formal interviews. Elegantly dressed in an Erdem skirt and sweater by in-house brand Iris & Ink, Phair is down to earth and charming, keen to talk business while brushing her hair ahead of this interview s accompanying photo shoot. THE TEMPERLEY FOR The Outnet daywear collection, launched on the site on October 7, represents a departure from Alice Temperley s previous focus on eveningwear. The range includes printed dresses, honeycombwave knits, lace pieces and jumpsuits, all at a slightly lower price point of 175 for a printed jersey top to 795 for the long Jayla embellished tulle dress (the mainline retails from around 325 for the sheer organza Angeles shirt to 3,495 for the long-sleeved Crivelli dress). This follows collaborations with Oscar de la Renta and Issa, launched as capsule collections in April and November 213 respectively. What appealed about the Temperley collection is that Alice was moving her brand in a certain direction, focusing on daywear and outfits that work for women from work to night, says Phair. So we felt that was a nice fit for our customer and that it filled a gap of a collaboration we haven t done before. We liked that she was choosing us to launch her new direction in her design. Temperley adds: I wanted to create a collection that is playful and fun, perfect for the modern woman who demands a wardrobe of pieces that can be mixed and matched. It was, however, the Victoria Beckham collaboration that brought The Outnet the most column inches. It joined forces with the former Spice Girl to auction off her many famous outfits to raise money for charity Mothers2Mothers at the end of August, with each piece first valued by auction house Christie s. It was a phenomenal awareness piece, says Phair. Victoria approached us Out and about: Iris & Ink has developed into a fully fledged own brand through her team, because she is an Outnet customer and has known about us. The sale was a huge success and Phair says Beckham s reputation for being hands on is accurate. She was in the office and she filmed the interviews and gave up her time, and she selected the pieces and tweeted about the auction. So that takes a certain level of involvement and organisation. THE LUXURY SECTOR was well known for its initial resistance to online, and as a segment where brand image is everything, it has also been reluctant to discount. So how has The Outnet, which is by definition a luxury discount etailer, managed to surmount those hurdles? We ve built up really strong partnerships with brands, but it wasn t immediate. The conversation with brands was tricky at the beginning, she admits. Understandably the brands were nervous. They understood the sample Sale concept, because it was product that sold quickly and then you never saw it again. Customers had to go and find a far-flung location, and that was OK because it didn t live side by side. But suddenly we were saying to the brands no, it s OK, you re going to be highly visible. She says that over time brands have come to realise that online is here to stay, and that having a full-price business in the form of Net-a-Porter or Mr Porter, along with the backing of the group and a platform that mirrors Net-a-Porter s successful editorial presentation, helped to reassure. Now, five years in, the most satisfying part of the journey for me has been to see brands not only agree to work with us from a commercial standpoint, but enjoy working with us and see us as one of the elements of their retail mix, as we speak to a customer that they may not have access to. She adds that The Outnet customer is just as likely to shop full-price, something she saw firsthand when the Temperley collection was launched to high-spending The Outnet customers at the brand s Mayfair store. BRANDS STOCKED ON the site are quick to praise it. It is the most premium reseller out there, says Kat Maconie, owner of the eponymous women s footwear brand. It s extremely well curated and presented in a luxurious and on-trend way. The buyers there really know how to select pieces. Their customer may be hunting for a bargain but still has a distinguished taste and a keen eye for design and quality. Rosanna Falconer, communication director at womenswear brand Matthew Williamson, agrees: The unique thing about The Outnet is that it offers year-round Sale shopping but maintains a luxury, fashion-forward perspective at its heart. Its tone of voice and branding encapsulates this the voice of a savvy, sophisticated, on-trend woman runs through everything from its tweets to product pages. The Outnet sells more than 25 brands, offering up to a 75% discount on a designer A to Z ranging from Alexander McQueen to Miu Miu, Nina Ricci and Zac Posen, with no set number taken on or dropped seasonally. Its buying team of around 3 buy in about 8% of the goods, with the remaining 2% being transfer stock from Net-a-Porter, following the full-price site s Sale. It also sells own brand Iris & Ink, which was launched in September 212 and is priced from 25 for a jersey T-shirt to 995 for a shearling coat. Originally positioned as an essentials range to complement its branded offer and fill the gaps, it has since developed into a brand in its own right. Phair declines to talk financials including The Outnet s sales or the near 1m loss the group made in its last reported accounts but she is clear about her priorities. Mobile will be key, already accounting for 4% of sales, as well as personalisation. The Outnet is also an international business with 15 staff dedicated to the fascia globally (excluding shared services among the group) selling to 17 countries, with offices in London, New York and Shanghai. The UK, US and Australia are its three key markets. Its Chinese platform is a locallanguage site, and Phair is about to jet off to China a few days after this interview: Asia-Pacific is a key focus for us, hence my whirlwind trip around China. [The trip will be] a bit of everything from fact-finding, relationship-building with brands, press and working with the team there. When you are running an international business, you have to make sure the teams globally see you. The Outnet s success is testament to the changed attitudes within the luxury sector to online, a change that shows no sign of slowing. Drapers Luxury Report / NOVEMBER 214 8
CHINESE VISAS Tearing down THE WALL REUTERS The UK s complex visa process means retailers are losing out to Europe for Chinese spend, but change is in the air Words by CHARLOTTE ROGERS Look around any of London s luxury retail destinations and you ll more than likely see Chinese shoppers snapping up products on their travels, in many instances served by Mandarin-speaking staff. China is the UK s largest visa market. Visas issued to Chinese nationals surged by 39% in 213 to 291,919, the Office for National Statistics reports, well ahead of travellers from Russia, Kuwait, India and Saudi Arabia. With the average price of luxury goods in China up to 7% higher than in Europe, due to a combination of import duties, VAT and consumption tax, it is little surprise they are keen to make their high-end purchases here. Upon arrival in the UK, Chinese consumers are seeking out brands like Givenchy, Valentino, Alexander McQueen and Balmain. When they visit the UK, the number one activity is shopping for luxury goods. Even Bond Street prices are a third of normal pricing in China, says Nick Rines, director of international communications at Anglo-Chinese digital marketing agency Qumin. Underlining the opportunity for UK-based retailers is the fact that during 213 Chinese consumers spent a total of 492m during their visits to the UK. On Bond Street their average spend was 1,815 per person versus an average international spend of 1,32, tax-free shopping services firm Global Blue found. However, the true scale of the opportunity is hindered by the UK s restrictive visa process. The 291,919 Chinese visas issued by the UK last year compares with the 1,434,418 issued by the 26 EU countries that make up the Schengen Area. Rines says Chinese consumers see UK visa regulations as arrogant and imperialist. Chinese nationals must make an appointment at one of 12 visa application centres in Beijing, Shanghai, Wuhan, Chengdu, Chongqing, Shenyang, Jinan, Hangzhou, Nanjing, Guangzhou, Shenzhen or Fuzhou. They are required to bring their current passport or valid travel identification, detailed travel plans, bank statements and a certified translation of any non-english documents. The Schengen visa, by contrast, encompasses 26 EU states, except the UK, Ireland, Croatia, Cyprus, Bulgaria and Romania, although the latter two are in the process of joining. Chinese citizens can apply through an external service provider or directly at the consulate of their destination country. The UK China Visa Alliance (UKCVA) reports that only 6% of Chinese visitors bother to obtain both visas, preferring the freedom of a multi-trip Schengen visa. The UK, therefore, misses out on an estimated 1.2bn of tourist spend compared with other European capitals. Strategies are now in place to streamline the UK visa application process. Following a successful pilot programme in October 213, held in association with China s top 2 tour operators, home secretary Theresa May confirmed in June the launch of a passport passback service that allows customers to simultaneously apply for a UK and Schengen visa. Since August, Chinese visitors can apply for a 24-hour visa service, while the Home Office Drapers Luxury Report / NOVEMBER 214 9
CHINESE VISAS has also extended its three- to five-day priority service. It also introduced premium service lounges in its Beijing, Shanghai and Guangzhou visa application centres to reduce waiting times. The UK remains a popular destination for international travellers and we have received almost 2.8 million visa applications over the past year, a Home Office spokesperson tells Drapers. We are taking steps to make it easier for Chinese visitors to apply for a UK and Schengen visa at the same time and we will be launching the British-Irish visa scheme later in the year, allowing Chinese and Indian nationals to visit the UK and Ireland on a single visa. While pleased with the progress, Paul Barnes, UKCVA campaign director, now wants VSF Global, the private organisation which operates the UK s visa application centres, to act as an agent for applicants requiring both a UK and a Schengen visa. The applicant would leave a duplicate copy of the application, together with the Schengen visa fee, and VFS Global would submit the application to the visa application centre of the Schengen country. Harrods has cautiously welcomed the streamlining of the process. A spokesperson says: The visa process placed on tourists travelling to the UK, especially from China, is still complicated, despite assurances from the UK government it is being simplified. We are not part of the Schengen visa system and we know that Chinese spend in Paris is eight times that of London representing a big missed opportunity not only for retailers but also the wider UK economy. We therefore continue to be vocal in our support of any initiative that simplifies visa applications. Harrods operates a tax-free shopping bureau to cater for its high demographic of Chinese and Middle Eastern consumers. Nationwide, all non-eu resident shoppers can claim back VAT (2%) on a minimum purchase price of 3, bought within three months of leaving the UK. From January to September 214, Chinese consumers applied for the most tax refunds (25%) from Global Blue, followed by Kuwaiti (8%), Saudi Arabian (6%) and Qatari (6%) nationals. The shopper must present their completed taxfree form to a customs officer at the airport, with their passport and purchases. The form can then VISAS UK VS SCHENGEN UK Price 83 Valid for Six months Access UK, to extend to the Republic of Ireland later this year Biometric testing 1 digits of the applicant s hand are scanned and a digital photograph taken Other Chinese tour groups (minimum five people) travelling to the UK for less than 3 days can apply for an approved destination status (ADS) agreement visa. Chinese nationals must stay with the group for the entire visit. The trip has to be organised by an ADS-licensed tour operator 1.2bn The estimated tourist spend the UK misses out on compared with the rest of Europe be taken to a refund office or sent to a processing centre. Since March, Global Blue can also pay the refunds directly to Alipay, online trading platform Alibaba s version of PayPal, which has 55 million registered users in China. OVER 5, TRAVELLERS have also signed up to the Global Blue card, which automatically fills in the tax-free form with the customer s registered details once swiped at a cash terminal. This prevents shoppers incorrectly filling in the form the most common reason a refund is rejected, according to Global Blue UK and Ireland country manager Gordon Clark. Another Global Blue service allows customers to pay in their own country s currency at retailers like Nike, Burberry and Liberty. As well as offering tax-back options, SCHENGEN Price 6 ( 47) Valid for Six months Access Ability to travel through or stay in all 26 Schengen states for a maximum of 9 days per 18-day period Biometric testing No testing or border checks Harvey Nichols employs staff who speak Cantonese and Mandarin. The luxury retailer s airport VIP fast-track service is eligible to shoppers spending more than 7,. The Harvey Nichols flagship store in Knightsbridge remains a highly attractive destination for international consumers and we are often the first port of call for high-net-worth tourists, says a Harvey Nichols spokesperson. We are pleased that the UK Home Office is taking measures to simplify the visa application process for Chinese tourists. Selfridges has recently seen a slight increase in the number of Chinese customers, with non-uk sales accounting for on average 3% of overall sales. There is no doubt that simplifying the UK visa application process would result in more Chinese visitors to the UK, and in turn have a positive impact on retail, said a spokesperson for the department store. We are constantly looking at solutions to make claiming VAT easier for overseas customers. Within the next three months Selfridges will open a bigger customer service space, which will make the process much more efficient for our international customers. Chinese consumers make an average of 37,392 journeys through Heathrow each month, and naturally Britain s largest airport argues that the simplest way to buy tax-free is in the departure lounge. Heathrow has seen a significant increase in international passengers choosing to defer their purchases to the airport, rather than use the VAT refund process. Our personal shopping service in particular is very popular with customers from Nigeria, China, Brazil, America and Mexico, who pre-brief a personal shopper on their size, preferences and concerns before they arrive at the airport, reports Jonathan Coen, Heathrow retail director. They typically spend more than 1,2 with each visit. The impact of allowing China s wealthy individuals easier access to the UK goes beyond luxury spend to investments in property and business. These savvy shoppers are some of the world s biggest spenders, yet they have not established their favourite retailers, so once they get to the UK it s all still to play for. ALAMY Drapers Luxury Report / NOVEMBER 214 1