SHANGHAI — Chinese New Year is just around the corner, and it’s shaping up to be a big season for spending in East Asia, as well as online.
Falling this year on Feb. 8, Chinese New Year brings with it a weeklong holiday in China. Traditionally the Spring Festival holidays are the biggest shopping season of the year for Chinese consumers, as they shop for gifts for loved ones, and have more money to spend as many employees receive their yearly bonuses right before their holiday.
Increasingly, this shopping is being done overseas as a larger percentage of China’s growing middle and upper class travel overseas for the holiday, rather than heading to their hometowns, to celebrate with their extended family.
Some 120 million Chinese traveled overseas in 2015, up 19.5 percent from 109 million outbound Chinese travelers in 2014, according to data from the China National Tourism Administration.
Experts predict these increases will continue this year and beyond, with the loosening of visa restrictions for Chinese tourists to many countries and rising disposable incomes in China. Popular destinations are expected to include Japan, Korea, Thailand, Australia and New Zealand. The waning popularity of Hong Kong to big-spending Mainlanders appears set to continue.
Jason Yu, general manager of Kantar Worldpanel China, doesn’t believe that recent terror attacks in Indonesia and France will have a big impact on the desire of Chinese people to travel to these places, and if there is an impact, it will be short-lived.
“We saw a short-term impact on tourism as a result of the Korean MERS epidemic last year, but it bounced back very quickly. After all, there are hundreds of millions of people in China who haven’t been to France before,” Yu said.
China’s economy has started 2016 on rocky ground with ongoing volatility in the stock market and a fluctuating currency accompanying a broader macro slowdown. But despite all of that, Brian Buchwald, chief executive officer of consumer intelligence company Bomoda is expecting overseas spending to be strong.
“A minor uncertainty that has hit the market since Jan. 1 is the continued deterioration of the yuan. But even with a more expensive dollar, yen and euro, purchases should continue to come from abroad — most particularly Western Europe and Japan,” he said.
According to Buchwald and Yu, categories that will do particularly well this year include luxury goods, which are still prized as gifts for loved ones.
“Chinese New Year is about gift-giving to others. While the corporate gifting market remains depressed due to the anticorruption environment in market, less business oriented categories like apparel and women’s watches should continue to gain momentum,” Buchwald said.
In terms of brands, Yu points to diversification as the new normal when it comes to what Chinese consumers are seeking.
“Popular brands will be more fragmented as Chinese consumers are exposed to more global brands, not just those with a presence in China,” Yu said.
The typical Chinese traveler currently spends an average of $1,678 on retail purchases per overseas trip, according to research from Fung Business Intelligence Center, a retail and technology think tank, and consulting firm China Luxury Advisors.
The U.S. sees the highest retail spend from Chinese travelers, with an average retail spend per Chinese traveler of $2,555 in 2015, followed by Europe’s $2,548, according to the data. These figures are much higher than the average spend in destinations close by, such as Hong Kong.
Traditionally, Chinese New Year has been a boon for Hong Kong retailers, but on the back of a broader trend of Mainland travelers looking to travel beyond the neighboring Special Administrative Zone, Thomson Cheng, chairman of the Hong Kong Retail Association, is expecting this holiday season to be a weak one.
“As an association we did a survey among our member companies. In general, the Chinese New Year expectation is not good. We can see that it will also be another drop,” Cheng said referencing the straight nine-month decline the city’s retail sector has experienced. “The strong Hong Kong dollar, the devaluation of the yuan, which makes it more expensive [to shop here]. Other countries are changing their visa rules to make it more welcoming to Chinese tourists.”
Official data for Hong Kong retail sales in November, the most recent month, has been released — numbers fell sharply by 7.8 percent year-over-year. Sales for the first 11 months of last year are down 3.1 percent from the year before. The association is estimating it to decline about 3.5 percent for the full year, worse than when SARS hit in 2003 and retail-sector sales dropped 2.3 percent.
Chow Tai Fook, the largest Hong Kong jeweler, said it expected sales to decline year-on-year during the months of January and February, after reporting an 11 percent drop in sales in the third quarter. Most businesses take the two months together to even out the seasonality of the Chinese New Year holiday, which follows the lunar calendar.
Likewise, Hong Kong’s largest beauty retailer Sasa International reported turnover dropped 14.2 percent in the most recent quarter to 2.141 billion Hong Kong dollars or about $276 million. Its same-store sales fell 12.2 percent from a year ago.
Another trend set to make waves this Chinese New Year will be consumers buying more online. E-commerce hasn’t traditionally performed particularly well over the holiday as logistics becomes a challenge when the country’s army of delivery people takes the week off simultaneously.
“This is gradually changing as more B2C sites tried to maintain some of their services during the holiday period,” Yu points out.
Alibaba, China’s biggest e-commerce company, is currently holding its inaugural “Ali Chinese New Year Shopping Festival” in the lead-up to Chinese New Year, a reflection of the increasing importance of e-commerce to Spring Festival shopping.