LONDON — Luxury-hungry Chinese tourists — and the weaker pound — have fueled tax-free sales in London over the past 12 months, with growth trends set to continue despite the U.K.’s trade and political woes.
Global Blue, the tax-free shopping company, said its VIP London Lounge, which opened on Albemarle Street in Mayfair a year ago, saw more than 29,000 guests from 88 nationalities. They spent more than 49 million pounds shopping in the U.K., with Chinese tourists accounting for the largest chunk of that spending.
The Chinese made up 26 percent of total spend at the lounge, with an average of 1,000 pounds per transaction. “The Chinese have been, and are still, the number-one nationality in terms of all the tax-free shopping we see in the U.K.,” said Derrick Hardman, managing director of Global Blue in the U.K. and Ireland.
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The Chinese presence in the U.K. cannot be underestimated: Hardman said they have been, and continue to be, the top-spending nationality, accounting for 32 percent of all tax-free shopping in the country.
They are also the biggest foreign nationality at U.K. universities, and their enthusiasm for British culture, history and heritage brands is driving sales.
In an interview, Hardman said shopping isn’t just transactional. It’s an adventure and a performance, with tourists wanting to be snapped with their Burberry shopping bags in front of the brand’s flagship on Regent Street, and tourists keen to go to Scotland to buy their whisky and tartans on site.
“Chinese tourists want to travel to the places and towns where the products are made. There is a huge kudos in buying British brands in Britain,” he said, adding that it was too early to provide numbers on Golden Week, which ran from Oct. 1 to 7. Global Blue is expecting to see an increase in sales, however.
Hardman said Saudi Arabians and Americans were also flooding into the British capital and spent nearly as much as the Chinese, around 900 pounds per transaction, according to data from the London Lounge.
U.S. tourists have been taking advantage of cheaper flights between the U.S. and the U.K., while Meghan Markle, now the Duchess of Sussex, has been attracting tourists from her native country to her adopted one.
He added the U.K. is the number-one destination for tourists from the Gulf States, with security, the English language and easier visa applications among the factors driving tourist flow.
Average spend has been increasing, too. Over the past 12 months, spend in the 1,500 pound-to-5,000 pound bracket increased by 23 percent, while spend on goods costing 5,000 pounds-plus has seen a 36 percent spike in growth, with high-end watches and jewelry among the drivers.
“People are attracted by the ranges on offer, the availability of product and the value of the pound,” he said of shopping in Britain.
High-end retailers have been seeing similar trends: In the first quarter of fiscal 2020, Watches of Switzerland, which specializes in luxury branded timepieces, reported a spike in total revenue of nearly 18 percent to 209.4 million pounds, driven by “robust” U.K. and U.S. performance.
Sales at Watches of Switzerland’s Heathrow Terminals 2, 3, 4 and 5 were up 9 percent in fiscal 2019. The retailer opened a unit at Gatwick North last August, and plans to expand its Heathrow Terminal 3 showroom in 2020.
Hardman said high-end and premium department store sales account for more than 50 percent of the tax-free shopping basket and that Global Blue works closely with the likes of Selfridges, Harrods, Harvey Nichols, Fortnum & Mason, Fenwick, John Lewis and Liberty on driving those sales.
Despite the uncertainty around Brexit — with three weeks to go, it’s still unclear when, and on what terms, Britain will leave the European Union — Hardman remains optimistic about the future.
“I’m very bullish at the moment that the trends we are seeing will continue across the nationalities. We are looking at growth going forward. The international traveling customer is spending on luxury.”
There may even be a silver lining to Brexit for continental European shoppers and tax-free companies such as Global Blue. Hardman said there is an opportunity for the U.K. government to extend tax-free shopping benefits to all non-U.K. residents once the U.K. leaves the EU.
He said that while the government has no plans to make those changes in the short term, the option remains on the table, with tax-free companies such as Global Blue eager for it to happen.
The London Lounge is spread across four rooms and spans 2,583 square feet, and is Global Blue’s second largest across its international portfolio, which includes Milan, Rome, Venice, Barcelona, Madrid, Munich and Paris.
The London Lounge offers tea service from Fortnum & Mason, Champagne and free Wi-Fi. It also has an early refund service, which puts cash back into shoppers’ hands before they leave the country.
Global Blue said Harvey Nichols, Burberry, Aquazzura, Bulgari, Longchamp and Max Mara were among the first merchants to collaborate with the London Lounge, taking over spaces with creative activations that showcased craftspeople at work and broadcasting runway shows on screen.
In its first year, the lounge processed more than 23,000 VAT refund transactions, handing about 7 million pounds back to shoppers.
Asked about the 25 percent tariffs the U.S. plans to place on imported British products including cashmere sweaters, men’s suits and women’s swimwear, Hardman said they will only make British locations more attractive to tourists and encourage them to spend locally.