GOLDEN OPPORTUNITY: British retailers accustomed to doing brisk business during Chinese Golden Week in October could be in for a shock due to the devalued yuan, according to new figures from Global Blue.
The retail tourism organization has warned that spending by Chinese shoppers in the U.K. declined 2 percent year-on-year in the month of August, following the devaluation of the yuan in June. However, overall growth in spend was up 8 percent in the seven months from January to July.
Global Blue said Golden Week, which runs from Oct. 1 to 7, has long been a bumper season for U.K. retailers, “but as the effects of economic instability continue to take over the country,” British stores could be in for a shock.
“Global Blue is anticipating the Golden Week rush will be significantly weaker this year, and the decline could continue throughout the fourth quarter as Chinese are left disinclined to book trips abroad,” Global Blue said.
U.K. retailers are also losing Chinese customers to Europe because of the weaker euro. Global Blue said the growth in Chinese shopper numbers in the U.K. slowed to 4 percent in the first half. By contrast, in the euro zone, growth increased 74 percent in the same period.
In addition, Global Blue said U.K. retailers are not adjusting their prices to counter the exchange rate differentials or the ongoing visa issues for Chinese visitors. It is considerably harder for Chinese tourists to enter the U.K. than it is for them to travel to continental Europe.
Gordon Clark, head of commercial, U.K. and Ireland, said forecasts for Chinese spend in the U.K. are not encouraging.
He said the U.K. government should make the 10-year, multiple entry visa the standard visa issued to Chinese travelers. “By doing so we can increase visitor numbers by more than 250,000, adding over 335 million pounds, or $509 million, per year to the U.K. economy,” he said.
Mario Ortelli, senior analyst at Bernstein Research, wrote in a report the devaluation of the currency would likely have “a predominantly negative impact” on luxury companies’ businesses.
He said the weaker currency would stem the foreign exchange benefit on the reported numbers of luxury goods companies and discourage international tourism by Chinese nationals, who are avid buyers of luxury goods when traveling abroad.
“We estimate that about 75 percent of luxury goods spending of the Chinese is conducted outside of Mainland China. The currency move could also affect consumer confidence and could foster a more cautious attitude in Chinese consumers with regards to discretionary purchases,” the Bernstein report said.