By 2025, Chinese luxury shoppers should spend 390 billion USD on luxury goods in China according to Bain & Company. The Covid-19 pandemic accelerated this prediction due to travel restrictions. Especially for beauty and cosmetics brands, the Chinese shopper was above all a Chinese traveler who could purchase in Europe, in China, or even more in airports. Hainan was the source of wealth for Travel Retail, and above in Asia. Today, the Chinese luxury shopper would preferably purchase in China. And Hainan is becoming the reference to luxury shopping in China.
The Paradise Island for Chinese and Travel Retail
History of Hainan
Hainan literally means “South of the Sea” but is often named the “Hawaii of China“. With its palm trees, warm sea, and fresh coconuts, Hainan is definitely a paradise island for both locals and tourists. Chinese love to travel to Hainan to have a special time with their family and friends. It was a key opportunity for locals to change the face of the island and turn this Chinese island into a wonderland of luxury and idyllic scenery. On average, 76 million international and domestic tourists are coming to Hainan every year. By comparison, there are only 9 million people living on the island.
Why Hainan is so much attractive for international tourists? Because you have all the benefits of a paradise island… at a low price. This is the preferred destination for yachting and golf where several competitions are organized. The island transformed into a key destination for luxury shoppers. Especially, when you know that you do not need any visa to go to Hainan. Today, 59 countries are concerned by this policy. Obviously, you need a visa to enter China and the procedures are time-consuming. But Hainan is an exception and you can freely enter. The Chinese government even wants to go further with a free trade port with no tariffs, low taxes, and local autonomy.
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A Family Destination Moving Towards A Luxury Destination
For a long time, Hainan was not a premium location. When you are in Sanya, the landscape is a surprising mix of Miami, Dubai, and Hawaii. You can even discover the biggest buddha on the water. Compared to Bali, Hainan was more of a low-cost luxury destination for tourists. For luxury shoppers, it was more symbolic to travel to Europe to live a luxury lifestyle rather than doing in Hainan. Even Generation Z tends to consider Hainan as a family destination instead of a luxury destination. But the Covid-19 crisis transformed this way of thinking.
China anticipated this transformation of Hainan island in 2009 by promoting it as the next destination for tourism and luxury. For instance, duty-free stores and huge malls like the Dadonghai International Shopping Center often compared to a pineapple. The island is a great hub of extraordinary shopping experiences to seduce Chinese luxury shoppers. By 2025, Chinese luxury shoppers should make 50% of their luxury purchase in China. Beauty and cosmetics brands definitely need to offer a new shopping journey including “New Retail” and phygital experiences.
The New Hainan for Luxury Shoppers
Chinese Government Policies to Boost Shopping in Hainan
The Chinese Central Government made a decision in favor of duty-free and tax-free shopping in June 2020. They decided to raise the duty-free allowance on Hainan Island, increasing from 30K RMB to 100K RMB per person and per year. In a word, a Chinese shopper who used to be limited to spend 30K RMB on purchases in Hainan can now purchase up to 100K RMB. This is a wonderful opportunity for travel retail departments in beauty and cosmetics brands. Especially when you know that most of their sales are generated in Hainan.
This decision is very important for Chinese tourists and international tourists who used to travel to Hainan. Surprisingly, Hainan island is a key destination for Russian tourists. When you travel to Sanya on Hainan Island, for instance, everything is written both in Chinese and in Russian from restaurant menus to exhibitions. Understanding the specificities of Hainan Island is determining for cosmetics brands. Travel Retail sales advisors should not only focus on how to target and address Chinese shoppers but also Russian shoppers.
The New Destination for Chinese Shoppers Overseas
Hainan island is becoming the major shopping destination for luxury shoppers. In the consumers’ mind, Sanya is slightly replacing Paris. Before, the Chinese shoppers used to travel directly to France to purchase luxury goods. They preferred to purchase their Louis Vuitton bag on Champs-Elysées and their makeup or skincare in airports to benefit from lower prices. Now, the Hainan island is a perfect hub to enjoy a luxury shopping experience while purchasing at a low-price in duty-free stores.
In 2020, sales in duty-free stores in Hainan reached 1.2 billion RMB July. The local sales have increased by +420% compared to the previous year. Luxury cosmetics brands benefit from a positive revenue in China and even a shopping frenzy in Hainan. If you plan to perform in China, you definitely need to link into Hainan. You will gain a more qualified target of luxury shoppers for your premium beauty brand. But to do so, you need to find reliable distributors.
Key Takeaways to Find Distributors on Hainan Island
Chinese beauty lovers will travel less in the coming years. You definitely need to meet the Chinese consumer directly in China. If you are only distributed on the European market, you will lose a wide portion of potential customers who used to know you while they were traveling to China. Now, you should bring the product to the client. To do so, you have key tips to help you implement a cost-effective strategy.
- Build your branding: In China, you need to have an identity so they can remember your brand easily. If you are not on the Chinese internet or on Chinese social media, local consumers cannot find you and distributors will not trust you. First, you need to create a Chinese website written in Chinese. Then, you need to work on your SEO to gain a better ranking on the Chinese Google, Baidu. Working with a Chinese team will help you to know the best keywords you can rank on to reach people.
- Improve your e-reputation: When you exist on the Chinese digital landscape, you need to go further with a positive e-reputation. In China, a lot of importance is given to word-of-mouth and recommendations. So, you will need to work on this by posting regular content in Chinese on forums, Q&A, and social media. You need to increase your brand awareness in a positive way. If you face bad comments, you could lose potential distributors that will think your brand is not profitable.
- Seduce distributors: If you have already worked on your branding and your e-reputation, you will finally need to seduce distributors with existing sales. A distributor would not want to work with you if you do not generate sales or revenues in China. To do so, you need to have existing sales on Taobao thanks to daigou. The daigou is a great alternative to Travel Retail as they import international brands and sell them at a tax-free price.
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Founded by Olivier Verot and Philip Qian, the Gentlemen Marketing Agency is based in Shanghai. We have worked on 1,000+ projects to help international brands enter and perform on the Chinese market. Are you looking for distributors in China. You can contact us to talk about your next project in China.