Shopping activity among Asia-Pacific (APAC) visitors to Europe weakened in the third quarter as currency pressures across the region diminished the spending power of APAC tourists – usually some of the highest international spenders.
Ten out of the 13 APAC countries measured by the Planet Shopper Index experienced a quarter-on-quarter decrease in their index score, resulting in the region as a whole registering a 5% fall in average score. Currency was a key driver of this fall, with many of the region’s major economies, including China, experiencing a weakening of international purchasing power as a result.
The Planet Shopper Index combines international payments provider Planet’s data on Tax Free purchases across Europe for each source market with key economic measures including inflation, GDP growth and currency movement, to produce a robust score for each country, illustrating its position in the global league of shopping nations.
More broadly, international shopper activity across the European retail market slowed marginally in the third quarter as currency pressures hampered emerging market consumers’ spending. The Q3 median score of 96 represented a four-point decline on Q2.
Top of the table was China, with an index score that was nearly three times the score of second-placed United States. Despite only having the fourth-highest average transaction value (ATV), ninth-lowest inflation rate and suffering a significant weakening of its currency, the sheer volume of Chinese shoppers’ spending placed it comfortably at the top of the table.
Chinese tourists spend more abroad than any other nation, parting with over $260 billion worldwide in 2016 – more than double the expenditure of second-placed United States. China’s annual Golden Week holiday proved to be a case in point of this, as Tax Free sales to Chinese shoppers during the holiday were up by 5.8% compared with last year.
Hong Kong’s score of 142 marked a 21-point decline on the previous quarter – the biggest fall of any market’s index score this quarter – while Malaysia’s 88-point score marked a 17-point fall. Hong Kong’s economic growth slowed from an unexpectedly high 4.6% year-on-year expansion in Q1 to a slower 3.5% in Q2. Many analysts and commentators expect ongoing trade disputes between China and the United States to have a negative impact on the heavily trade-reliant financial hub of Hong Kong.
Q3 saw a sizeable decrease in sales to Malaysian shoppers, with an 18.9% quarter-on-quarter decrease recorded. Similarly, ATV among Malaysian shoppers fell from €560 in Q2 to €445 in Q3 – a 20% decrease. Combined, this resulted in Malaysia falling from 10th place in Q2 to 18th in the latest index – the biggest fall in ranking of all markets in Q3.
Growth slowed in the Malaysian economy in the second quarter of the year, from 5.4% annual growth down to 4.5%, which will have impacted not only its index score, but also the level of expendable income its citizens have to spend abroad. More than this, the Malaysian ringgit fell by 0.8% in value against the euro and pound, diminishing the purchasing power of Malaysian travellers when abroad.
Unlike the EM markets of the APAC region, the developed market countries of Australia and Japan each experienced quarter-on-quarter growth in their scores, of 13 and 14 points, respectively.
Scores over 100 indicate stronger spending power compared with the market average, while scores below 100 indicate weaker purchasing power.
“International travel represents a huge opportunity for retailers in key destination markets, and the importance of international spend among European retailers is no exception. Across the EU, international shoppers spend on average 3.7 times more than domestic customers,” said David Perrotta, UK country manager of Planet. “It is not just nice to have, but business critical for retailers to understand where these opportunities lie, and how to capture their share of this spend.
“While a number of APAC nations saw their scores fall this quarter, they should not be discounted by retailers. In absolute terms, sales to these nations show that they are still crucial source markets for European retailers. As the propensity for international travel expands, and the purchasing power differentials among countries slowly and steadily narrow, this opportunity will only grow.
We are very much in a new normal when it comes to the average retail consumer in Europe, and retailers must do everything that they can to adapt to this diverse but incredibly lucrative group of shoppers. Even small behavioural changes to understand the cultural nuances and customs of different source market tourists can and does result in measurable increases in sales for those retailers who get it right.”