When Chinese tourists travel to Europe, many head for the continent’s luxury boutiques in order to snap up high-end fashion items. But as an increasing number of people from the world’s second-largest economy jet off around the globe, mid-market shoppers are also on the rise, with a taste for high street brands. Some 200 million people from mainland China are expected to travel abroad each year by 2020, according to investment bank CLSA – double last year’s figure. And one Swiss company has struck a deal with China’s version of PayPal to exploit this potential.
Global Blue, which allows foreign shoppers to buy goods tax-free, announced a tie up with Alipay, the payments arm of China’s e-retail giant Alibaba empire, last month. The move allows Chinese consumers abroad to be reimbursed the VAT paid on goods and services purchased from retailers signed up with Global Blue. David Baxby, CEO of Global Blue, said the “demand-driven” deal was in response to Chinese consumers wanting the convenience of using Alipay to reclaim taxes.
“What we found is that when travelers were coming through our network, getting the refunds here in Europe, they were asking: ‘Can I put this in my Alipay account?'”, Baxby told CNBC in a TV interview.
High taxes on goods in China – as well as the lack of availability of some brands – make shopping in Europe an attractive prospect for many Chinese consumers. Alipay says it has more than 550 million registered users, and earlier this year claimed that it processed nearly $150 billion in mobile transactions in 2013, outstripping Paypal.
Rise of ‘mid-market’ shopper
Chinese shoppers are Europe’s biggest tax-free shoppers, according to Global Blue data, and accounted for 27 percent of all tax claims made through the company in 2013. As well as being able to use Global Blue’s services in luxury stores like Harrods, shoppers can also claim tax refunds from high street brands such as Topshop.
“At the moment there’s a shift from the high-end to more of a mid-market shopper…they are not buying the $25,000, top-end watch. They are buying more of the brands that we would all buy in Western Europe and on the high street,” Baxby said.
“As their wealth grows and as they begin to tick off some of the basic building blocks of their lives…travel becomes one of the most important avenues for them to enjoy their new found wealth. I think Europe is well-positioned to continue to benefit from that.”
Global Blue is not the only company to partner with Alipay. Payments start-up Stripe started a service last month that detects if a shopper is located in mainland China, and gives them the option of paying for their goods through their Alipay account. More ventures like these are likely over the coming years, as more Chinese travel abroad, according to analysts – although the interest in luxury from Chinese consumers is unlikely to totally disappear.
“What you have seen happen is that the Chinese middle-class come abroad. It will be a pretty big growth market,” Rahul Sharma, managing director at Neev Capital, told CNBC in a phone interview. “I suspect though a lot of it will be about aspirational shopping like perfumes and sunglasses from big luxury brands.”