Value Retail sets sights on Chinese shoppers

Giant European discount outlet chain to open first complex outside continent in Suzhou next year

Having tried to satisfy Chinese tourists' seemingly insatiable appetite for luxury goods in various European capitals, Value Retail, one of the continent's largest discount outlet chains, is coming to its valued customers with the opening its first complex outside Europe in Suzhou, Jiangsu province.

At a media briefing, Chris Cabot, president of Value Retail China, said that many of the brands familiar to well-off Chinese shoppers, such as Burberry and Prada, will be represented in the company's Suzhou Village complex, which is due to open next spring.

All the merchandise on sale will be marked down by 40 to 50 percent from the retail price of the brands' stores in Shanghai and Beijing.

Around 100 brands will have outlets in the first phase of the complex, said Cabot. According to Bloomberg, Value Retail, which operates nine outlet villages throughout Europe, plans to spend about 350 million euros ($468 million) in China with local partners by 2015, while its budget on expanding European outlets is 150 million euros.

"The average spending of Chinese shoppers is 347 euros per visit, more than any other shoppers," said Ian Stazicker, the company's director of global marketing.

Chinese visitors spent a total of 30 million euros on tax-free goods at Value Retail's nine outlets in Europe in the first three months of 2013, up 49 percent year-on-year, while total sales of tax-free products to overseas visitors rose 34 percent.

"As a global holiday activity, shopping tourism is going from strength to strength. Overseas visitors accounted for 38 percent of the total to our villages and 55 percent of our sales, spending twice as much as that of other visitors," said Desiree Bollier, the company's CEO.

Chinese tourists to the overseas would spend an average of 875 euros on shopping per trip, more than people from any other country, according to the Hurun Report's Chinese Luxury Traveler White Paper 2013.

The report said the average spending per trip by Chinese travelers is 70 percent higher than the global average. It's the third consecutive year that Chinese tourists ranked first in the global shopping market.

"The global travel industry has recognized that China's luxury travelers are No 1 and are doing everything they can to appeal to this key group of luxury travelers," said Rupert Hoogewerf, chairman and chief researcher of Hurun Report, which published the latest findings in conjunction with International Luxury Travel Market Asia.

Aiming for Chinese consumers on one hand, Sarah Bartlett, head of Value Retail's communications international, said, Suzhou Village is also opening because it's the brands' choice.

"We came here in response to the brands that we work in partnership with," she said. Value Retail is of course not the only discount bazaar trying to attract customers in the Yangtze River Delta Region.

Opening up large outlet malls is a developing trend among major retail operators in China.

Shanghai Bailian Shopping Center Co Ltd, China's largest retail group, opened the group's first outlets in 2006 in suburban Shanghai's Qingpu district. The Qingpu outlets managed to make a profit the year it opened.

The success of the Qingpu outlets prompted Bailian to open the Xiasha outlets in Hangzhou, Zhejiang province, in June 2010. Covering a total of 13,000 sq m, it managed to achieve average daily sales worth more than 2 million yuan within a year of its opening.

Investing around 1 billion yuan, Bailian is about to open another outlet in neighboring Wuxi on June 29, which will be twice the size of its operation in Qingpu.

"In China, there are only a handful of properly run outlet centers with a relevant mix of international brands. Most are poor imitations with little or no connection to the brand or master franchisee," said Wang Yuanyuan, a retail analyst at Essence Securities.

CITIC Securities also said that only a few of China's more than 200 outlet malls are doing well.

The concept of outlet malls was introduced to the Chinese mainland when Yansha Youyi Shopping City opened its first project in Beijing in 2002. The new retailing practice grew rapidly after that, bringing together hundreds of luxury brands under one roof, usually outside a main city and near large expressway interchanges, rather than at an expensive city center location.

Shanghai Bailian Group Limited and Beijing Yansha Youyi Shopping City, both of which are State-owned and have long experience in retailing, led the development of the market in last few years.

Management consultants McKinsey and Co expects China's middle class to increase from the current level of 29 percent of the nation's 190 million urban households to 75 percent of 372 million urban households by 2025.