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China: Outbound TravelerA 101 on the opportunity July 2015

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P 2Quick warm-up fact: Shanghai population is 23 million = London, Madrid and Singapore combined

Image/Video: SkyFall 007 Shanghai fly-over

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AgendaContext on China

Observations and Stories

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Consumer Intelligence PracticeThe CI Practice uses best in class tools and methods to discern behavioral insights that drive design and business strategy for products, services and experiences

P 5The CI Practice offers global capabilities through the Sapient network

P 6The Sapient Shanghai office is a key node in our global network

P 7Example brands out of the Shanghai office

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Context

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P 9China is slightly smaller than the US in area

P 10China is the second largest economy

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8 Facts

China is a unique culture with a unique mindset

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8The number is considered good luck. This is for several reasons, including that it sounds like the word for prosperity

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In 2003, A telephone number with all digits being eights was sold for CN¥2.33 million (approximately US$280,000) to Sichuan Airlines in Chengdu, China

8 is so popular, it plays an important role in the everyday culture and shows up in interesting ways

P 148 facts…

Chinese Flag: The red represents the communist revolution; the five stars and their relationship represent the unity of the Chinese people under the leadership of the Communist Party of China. The larger star symbolizes the Communist Party of China, and the four smaller stars that surround the big star symbolize the four social classes (the working class, the peasantry, the urban petite bourgeoisie and the national bourgeoisie). Wikipedia

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1.4 Billionexpected to reach 1.5 billion by 2050 population growth is slowing and aging male/female ratio out of balance

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3 Yearsused more cement in 3 years than the United States did in all of the 20th century

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170 citieswith over 1 million people US has 10 new skyscraper every 5 days

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316% growtheconomy grew 7x as fast as America’s in the last 10 years America’s combined growth rate was 43%

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91st in GDPper capita GDP is below Bosnia

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632 millioninternet users

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527 million mobile internet users

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549 millionmonthly WeChat users *Twitter has 236 million

P 23HangzhouBut let’s talk about travel…

P 24ParisOutside of China…

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170 millionoutbound trips by 2020 about 100 million trips now only 10 million outbound trips in 2000

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4%of Chinese have passports that is expected to rise

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29%of all global luxury good purchased, are by Chinese

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30% taxon many products, especially luxury, purchased in China a strong disincentive to purchase at home

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2/3 overseasof all luxury good purchased, are purchased overseas

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40%Chinese spend this amount of their travel budget on shopping this is 2x as much as American and Japanese tourists

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150 $billionoverseas spending mostly luxury expected to grow to $260 billion by 2019

P 32Where are they going?

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Brands Are Interested

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Observations

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The Chinese outbound traveler

P 35Hoefstede’s cultural dimsensions were a guidepost for some of our thinking

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Power Indv Masculinity Uncertainty Time Indulgence

Chinese Americans

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The outbound Chinese tourist has the same level of wealth at the age of forty as Westerners’ have at the age of sixty

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Chinese purchase the “10 Fingers” Cartier, Tiffany, Chanel, Rolex, Dior, De Beers, Versace, Prada, LVMH, D&G.

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Foreign brands tend to be equated with quality; a strong reputation is important when considering a luxury purchase. Recognizable brand names also signal achievement and respect to others.

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There are two “Chinas” New money - new to shopping and luxury and service Older money - have higher expectations around service

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Anti-corruption and anti-extravagance efforts have curbed conspicuous consumption of luxury items. This has contributed to somewhat slowed growth of the luxury market.

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Chinese luxury preferences are beginning to shift from conspicuousness to understated luxury consumption, with more value on function (quality, craft) than symbolic consumption (logos, signaling wealth to others).

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Luxury shoppers ask others to shop

Shoppers often ask family or friends who are traveling to shop for them

Shoppers have contacts in different countries who will research, purchase and ships items abroad to collect a commission

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Business travelers shop for themselves and others With lists and little time

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Chinese want in-China price comparison transparency Yet many shops in Europe only provide prices in Euros and Pounds

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Chinese calculate savings different than westerners – they do not think in ‘percent off’

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Chinese travelers are looking for high quality, authentic and local products, and increasingly, experiences

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Chinese desire western style UX experiences and value online experiences that emphasize trust and authenticity

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Because of strong group orientation cultural values, friends and family influence the shopping process and purchase decision.

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China Outbound TravelerContext, Observations & Insights July 2015

For more information contact Rob Murray or Caroline Lu