Global Blue Asia Pacific Report 2018

ASIA

PACIFIC Digital knows no bounds

DECEMBER 2018

ABOUT US Global Blue invented the concept of Tax Free Shopping (TFS) almost 40 years ago and is now the worldwide leader, enhancing the globe shopper experience and creating value for retailers and partners through a range of products and services.

In Asia Pacific (APAC), Global Blue is the only TFS provider which has an established and extensive presence across the region, having operated in APAC for more than 20 years.

Currently, Global Blue offers its TFS services in China, Japan, Singapore and Korea, as well as provides its refund services to Australian Border Force. Global Blue is working with thousands of retailers, including more than 11,000 stores across these markets.

Global Blue continues to be the first mover in TFS in the APAC markets in which it operates: • First TFS operator in Singapore, Korea and Japan • First TFS operator in China through Global Blue’s partnership with Bank of China, which offers TFS services to merchants in Shanghai Across the region, Global Blue continues to introduce new products and services to enhance the globe shopper experience and create value for our merchants and partners. Recent examples include: • In Singapore, Global Blue has helped to design and implement the eTRS systems in conjunction with the Inland Revenue Authority of Singapore (IRAS) and our partner, NCS • In Japan, Global Blue is the first operator to introduce non-cash refund services and self-refunding kiosks to better serve the needs of globe shoppers and our merchants • In Korea, Global Blue was the first TFS operator to launch Alipay Instant Refunds at its downtown refund points

• In APAC, Global Blue is launching its Mobile Customer Care (MCC) to help, guide and enhance the overall TFS experience for inbound travellers in their destination country Global Blue also offers Dynamic Currency Conversion (DCC) and Multi-Currency Processing (MCP) services across 15 markets in APAC. Through its collaboration with 29 acquirers and partners across these markets, Global Blue offers its DCC and MCP services through ATMs, point of sale payment terminals and e-commerce channels. In addition, thanks to a large range of Intelligence insights, Global Blue helps merchants to better understand globe shoppers’ spending habits and behaviours. From such unique tools, Global Blue has created a large range of multi-channel marketing products including digital services and a portfolio of printed and outdoor advertising products, which are supported by marketing services to improve brand awareness.

For more information, visit globalblue.com/corporate/

REGIONAL OVERVIEW ASIA PACIFIC The key Tax Free Shopping figures to remember for the year 2018 in the Asia Pacific region.

SOUTH KOREA Number of luxury transactions has risen by a +34%

JAPAN Registers the highest TFS increase, with +40% in terms of sales in store and a +32% of transaction numbers

SINGAPORE Fashion and Watch & Jewellery (F&J), represent 37% and 34% of the island’s total TFS sales volumes respectively

NATIONALITIES FOCUS • Chinese record the highest growth of transaction numbers at +35% • Japanese spend luxury performance spend has risen by an impressive +40% • South Koreans have the lowest average TFS of the region, siting at 295 euros.

• Indonesians present a rather negative TFS performance for 2018, with both their sales in store and transaction numbers decreasing.

• Vietnamese report the highest average spend of all nationalities, with 606 euros spent in the region this year.

• Thailanders TFS fashion performance records the highest growth with a +15% increase in terms of sales in store and a +24% increase in terms of transaction numbers.

• Indians report a rather healthy average spend at 432 euros.

TFS sales in store have grown +18% from January to September 2018 compared to 2017 and overall transactions +20%.

CONTENTS 2-5 Interview with Greg Gelhaus, Head of Asia Pacific

17 China in the starting blocks 18

PART 1: APAC TRENDS

7 Riding a digital wave 8 Europe vs Asia: retail theatre or digital universe?

Recovering Korea 19 Australia: what’s new down under?

20 APAC partnerships

PART 3: NATIONALITIES

9 The digital payments hub 10 Get the message 11 Millennials galore

22 Growing intra-regional travel 23-24 Chinese: Online and ready to shop 25 Japanese: the comeback

PART 2: APAC DESTINATIONS

26 Vietnamese smiling ahead 27

13-14 Japan reigns supreme, still Toshi Shimizu interview 15-16 Singapore: what’s next?

Maturing Koreans 28 Shining a light on Thailanders, Indonesians and Indians

GREG GELHAUS INTERVIEW

“For the nine month ending September 2018, SIS has grown +18% versus the same period in 2017, while overall transactions have grown +20%”

Asia Pacific is continuing to act as a global growth engine for the Tax Free Shopping (TFS) Industry. Greg Gelhaus, Global Blue’s Head of Asia Pacific, provides an update on this year’s TFS performance and some of the key trends which defined the last 12 months across the Asia Pacific Region.

Against 2017 exceptional TFS performance, has the region managed to sustain these results in 2018?

Overall TFS sales-in-store (SIS) continued to expand in the APAC region in 2018 on the back of strong tourism arrival growth within the region.

For the nine months ending September 2018, SIS has grown +18% versus the same period in 2017, while overall transactions have grown +20%. We have now seen the overall region achieve positive TFS SIS growth for the past 23 consecutive months, starting in November 2016.

At a country level, Japan remains the region’s TFS hotspot despite the recent natural disasters, which have impacted tourism in certain areas of the country during the Summer season. For the nine months ending September 2018, TFS SIS has grown by +40% with transactions increasing by +32%. Chinese are the major drivers of this performance, increasing their TFS SIS by +51% compared to 2017. Today, Chinese globe shoppers are responsible for three-quarters of the total TFS spend in Japan.

In parallel, the Korean TFS market is showing signs of recovery after China has relaxed its travel ban to Korea, which was implemented in protest

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to Korea’s decision to install the THAAD missile defence system. With this positive development in 2018, Chinese globe shoppers now represent 64% of total TFS spend in the country and have helped to deliver positive TFS results in Korea this year - including +13% growth in TFS SIS and a +14% growth in TFS transactions.

Japan’s and Korea’s performances have helped to counterbalance Singapore’s slower results in 2018.

In Singapore, less favorable exchange rates have impacted spending from two of Singapore’s largest TFS nationalities, Indonesians and Malaysians.

While Indonesians remain Singapore’s second largest TFS nationality, their SIS has decreased by -8% compared to 2017. Similarly, Malaysians are still the #3 TFS nationality in Singapore, yet their SIS has decreased by -9% compared to 2017.

In terms of nationalities, Chinese globe shoppers continue to drive the majority of the TFS activity in the region, having grown 31% in terms of SIS and 35% in terms of transactions in the first nine months of 2018 versus the same period in the prior year. Chinese travellers now account for 63% of total TFS spend across the APAC region, with average spend per TFS transaction of €532. In addition, we have seen strong growth from Korean globe shoppers, posting a +12% increase of their

SIS and +11% in terms of transactions.

With the continued growth of the overall TFS industry across APAC, retailers who have remained focused on globe shoppers have seen the continued benefits offered by this unique group of consumers. Throughout this report, we will explore in detail the key factors and trends that have impacted Tax Free Shopping in Asia Pacific in 2018.

What are the emerging nationalities and trends that you think are worth mentioning?

This year, the surprise performance comes from Vietnamese. While these customers only represent 2% of total TFS spend in the region, their TFS spend is showing a +10% progression in terms of TFS SIS. After Cambodians and Malaysians, Vietnamese are the third heaviest spender in the region at €606 per transaction.

It will be important for retailers to be prepared to cater to this emerging TFS nationality going forward.

A major trend witnessed in Asia Pacific has been the growth of Millennials TFS spending. In Japan and Singapore, out of all age groups analysed, Millennials represent the largest cohort of globe shoppers at 49% and 36% of overall country SIS, respectively. When combined, millennial globe shoppers in Singapore and Japan have seen their TFS spend progress by +41%.

Another trend to consider is the growing interest in experiential tourism, which is starting to impact travel destinations. For example, in Japan, while Tokyo still holds onto the lion’s share of TFS spending, new TFS hotspots are starting to emerge, as globe shoppers look to combine their TFS shopping with experiencing other areas of the Country. Government statistics report that Okinawa has seen foreign tourists’ spending increase +84%, followed by Sapporo at +26% and Fukuoka at +15%.

A further trend that we have witnessed is the growing importance of Elite and Frequent

RISE O F MILLENNIAL GLOBE S HOP P ER S IN J APAN AND S INGAP OR E GLOBE SHOPPERS BY AGE GROUP: JAN – SEP 2018 VS. JAN – SEP 2017

50%

41%

40%

29%

30%

20%

13% 10%

5% 0%

-10%

10%

12%

4%

-2% 55+ YEAR OLDS

% OF TOTAL GLOBE SHOPPER

45-54 YEAR OLDS

% INCREASE OF TOTAL GLOBE SHOPPERS (FROM 2017 VS 2018)

35-44 YEAR OLDS

MILLENNIALS 18-34 YEAR OLDS

%INCREASE OF TAX FREE SPEND IN JP & SG (2018 VS. 2017)

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G LO B E S HO PPE R PRO FIL E : KO R EA AND SINGA PO RE 1 ELITE2 % OF TOTAL GLOBE SHOPPER

0.4%

1% 29%

12.9%

% OF TOTAL SALES

FREQUENT3 % OF TOTAL GLOBE SHOPPER

16.1%

15.9%

34%

22.1%

% OF TOTAL SALES

INFREQUENT % OF TOTAL GLOBE SHOPPER

83.5%

83.1%

53.2%

shoppers in the region. As highlighted in the charts to the left for Singapore and Korea, these globe shoppers are clear contributors to these top markets’ TFS performance. In Singapore for example, although Elite and Frequent shoppers combined only represent 17% of total globe shoppers, they make up more than half of the country’s TFS total spend from October 2017 to September 2018. This is very similar to Korea where Elite and Frequent shoppers combined only amount to 16% of total globe shoppers in the country but are responsible for nearly half of total TFS spend in the country. Given this trend, it will be important for merchants to consider how to grow their relationships with these high spending and habitual TFS customers. Global Blue, through its portfolio of products and services, can help our partners to focus their resources on the right customers, at the right time.

48.9%

What is the role of digital activities in these TFS results?

% OF TOTAL SALES

KO REA

SINGAP OR E

Data collected from the months of January to September 2018

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Globe shoppers who have spent above 40,000€ over the last 24 months

2

Globe shoppers who have taken more than 3 trips abroad over the last 24 months

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Our region is nearly 100% digital, including issuing tax-free forms in stores, validating taxfree forms by Customs at country exit points and refunding through digital systems at airports and downtown refund counters. Given this digital environment, Global Blue’s portfolio of products and services in Asia Pacific is continually evolving.

For example, to address the growing use of mobile wallets by globe shoppers across the Region, we have introduced Alipay Instant Refunds in Korea and are in the process of starting Alipay and WeChat Refunds in Japan.

This year’s report includes an article which discusses the adoption and high penetration of smartphones in APAC and the impact that this is having on how tourists’ shop and how brands interact with these customers. These changes provide many new opportunities for TFS industry stakeholders to improve globe shoppers’ tax free shopping journeys. To help address these opportunities, Global Blue has developed a mobile platform, entitled Mobile Customer Care (MCC), which helps to guide globe shoppers throughout the TFS process and ultimately helps them to complete all the required steps to receive their tax refunds. This in turn ensures that our merchant partners can achieve a higher TFS completion ratio among their Customers.

Can you talk us through the product innovations launched by Global Blue throughout 2018?

In 2018, we have developed several product innovations across the APAC Region.

For example, we are working closely with Inland Revenue Authority of Singapore (IRAS) and our partner NCS to develop the latest generation of eTRS systems in the country, which will go live in 2019. At the same time, in order to prepare Singapore to welcome this new system, we have introduced our local merchants to our IC2 line of issuing solutions, which enables our clients to issue transactions through Desktop, Web, Mobile and Terminal devices.

In Japan, in addition to introducing credit card refunds and soon Alipay and WeChat Pay refunds, we have introduced new issuing and refunding kiosks in department stores.

In Korea, in addition to launching Alipay instant refunds, we have launched our MCC service and have recently introduced in-store refunds through our new IC2 mobile and terminal solutions.

What are your priorities for 2019?

The Asia Pacific region now accounts for approximately one-third of Global Blue’s transactions worldwide. As regional tourism growth continues to outstrip that of Europe, Asia Pacific’s share of global TFS activity will continue to grow. We should consider that there are still many countries within Asia Pacific that do not currently operate TFS schemes and we expect to see several of these countries launching Tax Free Shopping over the coming years, further expanding our industry’s footprint.

In this favorable context, we will continue to strongly support our partners to capture these growth opportunities. This includes continuing to work with our clients to enhance the TFS shopping experience for their globe shoppers through our innovative solutions such as our IC2 suite of issuing solutions, MCC, our varied refunding solutions in-store and at our refund points and through our best-in-class Intelligence and Marketing services.

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APAC TRENDS

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RIDING A DIGITAL WAVE While the future of physical retail might be a hot topic in Europe, in AsiaPacific, retailers and brands with physical footprints have an altogether different approach to updating formats to incorporate digital mediums into the store experience.

In Asia Pacific, brands, boutiques and department stores alike are harnessing technology to engage with customers, to forge relationships based on connectivity and to immerse guests in multi-channel campaigns within their spaces. This is especially prevalent in Asia-Pacific due to the regional importance of digital payment systems such as AliPay and social networking platforms such as WeChat used by Chinese consumers.

brands that are breaking through online, giving them the opportunity to test consumer responses and demand before investing in physical retail spaces.

The trend for offline pop-ups has been growing steadily since the beginning of 2017, states Vincent Tan, founder of a pop-up marketing agency called Popex.

He told Chinese media Netease Tech, “The offline pop-up has reached a near-

“Asia Pacific retailers are raising digital standards by facilitating increasingly connected consumers’ shopping activities.”

Asia-Pacific retailers are raising digital standards by facilitating increasingly connected consumers’ shopping activities. These globe shoppers’ appetite for technological progress allows for more targeted, datadriven paths to purchase that manage to mix both physical and digital channels for a blended phygital retail reality.

Asia leads wave for digital pop-ups E-commerce brands are increasingly hosting pop-ups both online and offline to amplify their brand message and engage with digitally savvy consumers.

Multi-brand e-commerce platforms such as Secoo or MyMM are leading consumers on a phy-gital journey by inviting them into stores to touch, feel and explore exclusive product offers.

Last year Secoo launched a pop-up store with lingerie brand La Perla in Beijing’s popular Sanlitun shopping district.

Similarly, MyMM, a part of the Lane Crawford Joyce Group, fuses mobile commerce and social media for a unique retail strategy that centres on content-driven campaigns. For example, earlier this year, MyMM launched a Trend Hunter themed popup in Shanghai, encouraging visitors to touch the merchandise featured on the website. The company said the pop-up theme benefits less well-known fashion

explosive state this year,” highlighting how these physical stores are seen as a solution to both acquire new customers online, as well as an opportunity for offline brands or retailers to work together in order to attract footfall.

E-commerce operators are also looking to virtual pop-ups for innovative ways to promote their platforms online.

Some luxury brands such as Chanel or Audemars Piguet are experimenting with e-commerce platforms that allow them to test limited edition collaborations. After Chanel partnered with Net-a-Porter in 2017 for its first high-profile digital pop-up store, in early 2018, luxury watch brand Audemars Piguet launched a boutique in partnership with JD.com.

This was a first for the 143-year-old Swiss manufacturer which offered an opportunity to evaluate sales performance and customer satisfaction before confirming any further online activities.

retailers’ turn to utilise digital concierge services to offer more personalised shopping opportunities both in-store and online. In August, Uniqlo started working with Google Assistant in Japan and has launched Uniqlo IQ, a digital chatbot service that helps customers find style inspiration and recommendations by searching across metrics such as occasion, products the user has seen in magazines or social media, and even by colour based on the user’s daily horoscope. The Uniqlo IQ app allows users to shop online or locate the nearest store to buy the merchandise in-store.

Asia is where retailers are innovating across digital channels, appealing to consumers who are digitally savvy and expect heightened levels of service. To operate in this fast-paced, technologydriven marketplace, brands need to think digital-first and ensure that they talk to their customers online and in-store, while adding the latest marketing initiatives such as those involving AI and personalisation into the mix.

Conversational commerce As voice-assistants become more commonplace in the home, it’s now

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EUROPE VS ASIA: RETAIL THEATRE OR DIGITAL UNIVERSE? The global retail marketplace is getting smaller, as consumers resort to shopping online instead of seeking out shopping in physical stores.

Asia’s digital drive for personalisation There are two key trends driving new shopping behaviours among consumers across Asia-Pacific and especially for younger consumers such as Millennials and Gen Z: that is digital status and personalisation of both products and retail experience.

Regarding digital status, one of Asia’s biggest beauty retail players, The Shilla Duty Free, is pushing digital loyalty through its new Shilla Tipping function on its mobile app that allows customers to leave reviews on specific products.

Regarding personalisation of products and retail experience, retailers are experimenting with interactive technology in-store.

At Shiseido’s flagship in the Ginza Six shopping complex in Tokyo, a connected smart-mirror offers a highly personalised experience with granular advice and skin diagnosis services. Customers can make use of the device by having their picture taken with the skin analysis results shown, followed by a step-by-step

“Both Europe and Asia retain their retail characteristics of brand heritage and digital innovation, respectively”

on-screen guide for how to apply a curated range of products. Afterwards, users can scan a QR code generated on the screen to put their results and recommended treatments on their own phone.

Europe does heritage One of Europe’s biggest assets is the original heritage of its luxury brands.

9% of Chinese consumers prefer to shop for luxury brands in monobrand stores for the reassurance and competitive pricing, according to McKinsey. Luxury brands in turn like to amplify the value of their historic location by offering unique, exclusive products and experiences.

‘Made in France’ truly resonates with younger Chinese travellers, fond of limited editions and artistic collaborations, as the scarcity of the items makes the products even more desirable to them. More than ever, younger Chinese customers are looking to express their individuality and search for ways to differentiate themselves from mass buying trends.

One of the many European examples is Bulgari’s Rome flagship store featuring a museum, café area and interactive digital walls that take visitors through the archive of its glamorous jewellery and watch collections.

In Paris, Louis Vuitton recreated its luggage history and leather goods craftsmanship within a six-storey brand temple; luxury retail theatre at its finest.

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Europe’s Millennialisation of retail Immersive branded playgrounds are European retailers’ latest tactic to attract Millennials to spend time in-store. Experience is king for this group who are more likely to make a purchase in a physical store if they can share a selfie or check-in at an Instagram-worthy retail location.

Tiffany & Co has launched a new concept store in Covent Garden in London with a merchandise selection that is quite different from its usual jewellery and luxury lifestyle offer.

The retail concept, called ‘Style Studio’, is described by the brand as ‘playful and immersive’ and it’s no surprise to learn that it is aimed at younger consumers. The floor to ceiling blue box design focuses on brand graphics and advertising campaign imagery. Plus, there is a personalisation bar where customers can #MakeItTiffany. Here customers can utilise the standard engraving service, or sketch more personal designs to be etched onto their purchases. Yet another clear sign of the brand’s new younger direction is the perfume vending machine.

While the world of travel retail grows smaller via digital channels, Both Europe and Asia retain their retail characteristics of brand heritage and digital innovation, respectively.

Smart brands will push for a complimentary message, attracting Globe Shoppers that recognise the value from each region.

THE DIGITAL PAYMENTS HUB The APAC region is home to some of the world’s most advanced nations when it comes to digital payments. In fact, GlobalData’s latest Consumer Payments Insight Survey suggests that mobile and e-wallet payments are now taking over from traditional cash, card and bank-transfer payments. As of 2018, where are the digital payment hotspots in the region? Who are the top users?

Ravi Sharma, Senior Payments Analyst at GlobalData, states, “Adoption of alternative payments in the AsiaPacific region has occurred well ahead of that in the West. Asia’s card infrastructure and payment behaviour are not well entrenched and therefore alternative payment tools offer a welcome substitute to cash. Rising smartphone penetration coupled with a large unbanked population has also turned the region into a potential growth market for alternative payments.”

Mobile wallets are expected to become the primary method of payment worldwide by 2021, according to Worldpay’s Global Payments Report, which predicts a global usage rate of 46% in three years, with Asia-Pacific ahead of the global average at 51% usage.

While many European shoppers favour Near Field Communication payments where two devices communicate with each other, phone to POS for example, QR codes are key to WeChat and AliPay’s e-wallets, with QR payments increasing 381% in China during

2016, a value of RMB58.8 trillion. The method is so common, it’s even used by street vendors and buskers, who were traditionally cash-only. A survey

by PayPal found that 83% of Chinese respondents were aware of e-wallets, with 78% using them, though only 48% cite the method as their preferred payment method.

partly as a result of the government’s recent demonetisation programme, which forced Indians to find other alternatives to cash. Thailand’s government is also encouraging cashless payments; its PromptPay scheme has garnered over 14m registrations, hitting an average of 2.9m transactions per day by Q2 2018.

Beyond China, mobile wallets are becoming increasingly prevalent in Asia-Pacific, with Alipay launching in Japan and WeChat Pay expanding to Singapore this year. Other local operators are also looking to take a share of this active market. Grab has been launching its GrabPay Wallet across South East Asia during 2018, while in Indonesia DOKU’s e-wallet is the app of choice and in Malaysia consumers are favouring Digi’s vCash. In Singapore, seven different companies – Diners Club, EZi Wallet, EZ-Link, Liquid Pay, Mastercard, Wirecard and UnionPay International have joined forces to offer QR payments.

The next phase of digital payments is seeing e-wallets and apps expand into new areas of financial management, with Alipay and WeChat Pay already introducing facilities such as wealth management, taxi ordering and utility bill payments. In such a booming segment, new players are emerging, such as low-cost carrier AirAsia, which has introduced BigPay. The e-wallet allows international money transfers and preferential foreign exchange rates.

In India, Paytm has emerged as a major player, acquiring over 200m users,

Daniel Xian, CEO of SwiftPass, the leading mobile payment provider in China, discusses SwiftPass’ collaboration with Global Blue.

“The main challenge the digital payment industry faces is to provide the adequate solutions to a market in constant evolution. SwiftPass provides customised integration solutions and technical platforms to institutions and banks and installations tailored to merchants’ systems.

From an operational perspective, our objectives are to accelerate the application process with WeChat Pay and Alipay, communicate with local authorities to gather business licence approval and conduct on-site training and share marketing strategy prior to launching the product. In parallel, for merchants, our value-added services include marketing support such as WeChat official account management or mobile marketing solutions. Our

For businesses hoping to attract the Asia-Pacific consumer, either at home or abroad, it’s becoming increasingly important to offer digital payment options. No longer an “alternative”, digital payment options are now essential.

collaboration with Global Blue started in April 2018, with a standalone solution based on WeChat Pay, Alipay and UnionPay’s integration requirements, fully applicable to all Global Blue merchants.

Together with Global Blue, we have developed a customised money collecting app called SPAY + SC2 designed to increase payment efficiency in-store. The solution comprises transaction and cashier management facilities and automatic receipt printing after payment. The solution has been designed to suit any sized merchant. In Europe, SwiftPass and Global Blue have invested in EuroPass to bring together alternative payment options such as Alipay and WeChat Pay to the continent. Collectively, we are also working on combining this payment solution with Global Blue’s TFS solution to provide a seamless TFS journey for both merchants and shoppers.”

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GET THE MESSAGE Consumers in APAC are hugely invested in their smartphones. In fact, more than half of the world’s mobile phone 2.7bn subscribers live in the Region.

In particular, chat apps have become immensely popular with APAC globe shoppers to exchange shopping and product recommendations, in turn creating new opportunities for retailers to promote their products and services.

As chat apps become more essential to consumers’ person-to-person communications, developers are adding functionality that includes entertainment, shopping, travel booking and even payment.

Social media and messaging apps are a key driver for such a high mobile penetration rate. According to WeAreSocial’s annual report, Filipinos spend the most time on social media of any global nationality, spending an average of 4 hours a day on their favourite platforms, while Indonesians and Thais have the third and fourth spots in the global rankings. The report also found that South Korea, Singapore, Taiwan, Hong Kong, New Zealand and Thailand are all in the top 10 countries in terms of social media penetration, while China, India, Indonesia, Vietnam and Japan have the fastest-growing markets.

Thanks to blockbuster apps like WeChat, Asia-Pacific consumers are pioneers in messaging, using chat apps rather than SMS to communicate with each other. These apps allow consumers to communicate rapidly and privately over data networks, whether one-to-one or in groups.

WeChat reports a billion users, but despite its size, it’s not necessarily the most popular chat app across the region. WhatsApp is the dominant app in Malaysia and India, KakaoTalk is top

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in South Korea, Facebook Messenger leads in the Philippines and Oceania and LINE is the most popular platform in Japan and Thailand.

As chat apps become more essential to consumers’ person-to-person communication, developers are adding functionality that includes entertainment, shopping, travel booking and even payment. The growing appeal of all-in-one apps is creating competition in the chat market, with Indian mobile wallet giant Paytm introducing messaging as part of its service, In China, WeChat’s dominance is being challenged by new start-ups like Zidan Duanxin, also known as Bullet, which aims to be more private than WeChat, making it a “a much safer place to send sensitive information”, according to founder Luo Yonghao. The app was an instant hit when it launched in September 2018, becoming China’s most downloaded app and gaining 7.2m users in just 2 weeks.

Messaging apps play an important role in the globe shopping experience, not

just because they allow travellers to stay in touch with friends and family at home, but because their trips are increasingly informed by chat. Chinese travellers use WeChat for travel inspiration, research and booking before departure, as well as at their destination for local recommendations and payment. Travel companies are recognising the potential of chat apps to provide direct, fast interactions with their customers. People planning to travel with Malaysia Airlines can now book directly through Facebook Messenger, while KLM has partnered with WhatsApp to enable users to download their boarding pass and receive flight updates through the app. Messaging is so vital to the travel experience for many travellers, that airlines such as Delta, American and United are enabling passengers to use the apps for free on their flights.

While brands often focus on social media as the way to communicate with mobile consumers, the more private messaging apps are becoming the preferred way to inspire customers, as well as keeping them informed throughout their travel journey.

MILLENNIALS GALORE Asia’s millennials are set to become the most influential group in travel and shopping. By 2020, 60% of the world’s millennial population will live in Asia, with the highest spending power of any generation yet – an estimated US$6 trillion. As a generation of brand savvy, digitally connected and increasingly well-travelled people, how are they shaping the globe shopping market?

One generation, many differences Expedia research found that Chinese millennials are the most avid travellers with over 35 days of travel each year, compared to young Japanese travellers who can only enjoy 12 days. However, young Australians are more likely to travel abroad, as Chinese and Japanese millennials tend to travel within their own country.

While young travellers are generally more independent than older generations, 38% still want a packaged group tour.

However, 61% are looking for customisable trips, according to a study of millennials in Singapore, Malaysia, Indonesia, China, Japan and Australia by GfK. The vast majority of millennials want to be enriched and excited by travel,

“1 in 4 APAC millennials will plan which items they want to buy before they leave home.”

they’ve discovered at their destination. Across the region, 25% of affluent millennials will check out boutiques from global brands at their destination, while 18% research local designers. Finding global brands abroad is most important for affluent mainland Chinese, Indonesian and Indian travellers, while those from Taiwan and Hong Kong prioritise local labels.

Of course, such a huge generational cohort can be difficult to generalise, with variations in spending power and knowledge from market to market. But as this generation’s influence grows, it’s increasingly important for merchants to understand how their shopping patterns are distinct, and how they are evolving. Brands that can be agile to different markets and platforms, providing new experiences and useful information, are best placed to win millennial travellers’ favour.

with 80% wanting to visit new places and 77% looking for destinations that offer new activities and experiences.

Karun Budhraja, Amadeus’ vice president for Corporate Marketing & Communications, Asia Pacific, said millennials “have an openness to new experiences and a willingness to rattle the status quo. They want different experiences in travel, so the industry must serve them differently”.

Amadeus research found that social media and brand recommendations are key to inspiring new travel experiences, with 27% of APAC millennials open to recommendations from travel brands. However, value is a key driver in decision-making, with 37% paying attention to recommendations that help them save money. Across the region, 31% of millennials prefer recommendations via email, with social media suggestions coming in second at 23%. But there are some regional differences, with 50% of Thai travellers and 34% of Indonesians preferring recommendations via social media first.

Shopping the millennial way Many young travellers plan their shopping carefully when abroad, using in-depth advance research and recommendations from friends and influencers to create a specific shopping list. Research from Publicis found that 1 in 4 APAC millennials will plan which items they want to buy before they leave home. However, planned purchases don’t always materialise: 66% of affluent Asian travellers don’t buy everything on their list and 65% buy from a brand

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APAC DESTINATIONS

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JAPAN REIGNS SUPREME, STILL After exceptional results last year, Tax Free Shopping (TFS) growth in Japan continued unabated in 2018, to become Global Blue’s #1 country both in terms of total number of TFS transactions and in terms of total TFS sales in store. What are the key drivers and best performing nationalities behind this stellar performance? In addition, with less than 2 years to go before Japan hosts the 2020 Summer Olympic Games, how is the country getting ready to welcome this major international event?

The country of firsts In more than one way, Japan is a unique market. The geography of the island country has strongly impacted its retail landscape and globe shoppers’ behaviour.

number of market-first innovations tailored around local merchants’ needs and demanding globe shoppers’ expectations. GripsJ, our localised

refunds in Japan. The solution was first introduced in department stores and will soon be present at shopping malls.

In addition, the option for Chinese

issuing solution was developed specifically for the Japanese market.

Both desktop and terminal solutions are available in-store, as well as a separate solution for shopping malls with multiple shops.

globe shoppers to be refunded onto their Alipay or WeChat Pay digital wallets is coming soon.

Unlike European countries or some of its APAC neighbors, Japan benefits from several retail hot spots (Tokyo, Umeda, Osaka, Yokohama…) centered around massive shopping malls spread along its 3000 km long surface. This benefits the country’s overall TFS performance, marking a +40% increase of sales in store from January 2018 to September 2018 compared to the same period the year before. Transactions have also grown by +32%. In terms of categories, Fashion sales in store registered a +31% increase and +13% in terms of transactions.

From January to September 2018, luxury shopping showed healthy TFS sales in store growth at +26% compared to 2017 and +26% increase in terms of transactions, which was the largest progression out of all countries observed in the report. But luxury shopping is losing market share in the face of fast fashion spending growth.

This is the result of two current retail phenomenon occurring in the region: mixing luxury items with more high street brands and the growth of slightly less affluent globe shoppers’, who are looking for less expensive, daily-use products.

Over the last five years, Japan has seen its number of visitors reach new heights, including welcoming 20 million visitors in 2017. Chinese globe shoppers are the most active shoppers in Japan, representing 76% of the total TFS spend in the country followed by Koreans at 5%.

In response to this continued tourism growth, Global Blue implemented a

Global Blue also introduced to the Japanese market issuing and refunding kiosks to strengthen and streamline merchant’s and travelers’ TFS shopping experiences in-store.

Global Blue was also the first TFS provider to introduce non-cash

Further, Global Blue Japan has introduced a new queue management system with its partner, Lineberty.

Accessible from the web or via an app, Liberty enables globe shoppers to book their queue slot at issuing and refunding counters. They are kept up to-date on their queue slot via an app or an SMS to enable globe shoppers to maximise their time for tax-free shopping.

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TOSHI SHIMIZU INTERVIEW

A confident and expanding market: interview with Toshi Shimizu, Japan Country Manager What are Japan’s key retail trademarks when it comes to TFS? To counterbalance weak domestic consumer consumption, more than ever, Japan relies on inbound tourism to boost its economy. In this context, the Japanese government is taking an active role by implementing tourism-friendly measures, with major benefits to the retail and the overall TFS industries.

For example, in June 2018, the Japan Government announced relaxed tax-free shopping rules to encourage spending by foreign visitors. Tourists can now combine their consumable and nonconsumable purchases to reach the minimum taxfree shopping spend amount of 5,000 JPY (47USD).

With the 2020 Tokyo Olympics in sight, the government aims to simplify and modernise TFS in the country by going paperless. For example, merchants will have to send realtime their digitally issued transactions to the Government starting in 2020. On our side, Global Blue is working hard to be at the forefront of the upcoming changes.

Concerning Globe Shoppers’, what are the most important profile evolutions you have witnessed?

The TFS market in Japan has evolved to be much more segmented and refined. Focusing on a sole nationality, most often Chinese, is not enough anymore. New emerging TFS nationalities such as Vietnamese and changing tourism trends require retail stakeholders to be much more pro-active and agile in the way they come into contact with globe shoppers.

For example, Chinese used to post the highest spending when travelling in the region. But emerging nationalities are starting to show up in our data, posting significantly higher average spend compared to more developed nationalities.

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As such, Cambodians posted a 1039€ average spend, the highest out of all nationalities observed, followed by Malaysians at 693€ and Vietnamese at 606€. Emerging nationalities will be an opportunity for luxury retailers to address going forward and proposing tax-free shopping to these emerging nationalities, an audience more recently accustomed to luxury, can be just the right incentive to encourage their spending.

In parallel, travellers have never been more interested in experience than today. Tourists’ budgets allocated to shopping are decreasing to benefit other activities such as dining and cultural visits. In this context, it is critical for Japanese retail stakeholders to propose value-added services when it comes to shopping.

What lies ahead for Global Blue Japan?

APAC customers are increasingly tech-savvy and digital. It is therefore crucial for Global Blue to answer their needs in a way that makes their TFS journeys even smoother, for example, by offering them multiple refund options, such as refunds to Alipay or WeChat Pay digital wallets.

In addition, in response to increasing tourism arrivals, helping our merchants to improve their operational efficiency will be critical. Global Blue’s suite of products and services, such as our mobile issuing solutions, kiosks and digital tax-free form archive services, can help to improve the efficiency of TFS operations in-store. In addition, our unique data services can help merchants to plan for peak inbound tourism seasons.

Further, targeting specific profiles and nationalities of Globe Shoppers has never been more relevant in a context of increased tourism flows in Japan. Thanks to our suite of Intelligence and Marketing Services, we are able to create merchandising campaigns targeting specific customer groups such as VIP Globe Shoppers.

SINGAPORE: WHAT’S NEXT? Singapore already enjoys a mature retail landscape; yet more new international brands are choosing Singapore as their next destination to expand their business. For the years to come, raising even higher Singapore’s profile as the ultimate shopping destination in APAC will involve additional investments and innovations.

Exceptional retail mix Singapore presents a diverse retail landscape. In the APAC region, the country is the definitive stronghold for Tax Free Shopping (TFS) luxury transactions . This trend is supported by two vital categories – Fashion and Watch & Jewellery (W&J), each representing 37% and 34% of the island’s total TFS sales volumes, respectively.

Staying ahead of the competition Singapore already enjoys a solid reputation as a luxury shopping hub and welcomes a high number of affluent travellers, contributing to retail spend. But amidst tougher regional retail competition, now the challenge lies in offering a heightened shopping experience to sophisticated and well-travelled consumers. Ranita Sundramoorthy, Director, Retail and Dining at the Singapore Tourism Board, encourages retailers “to look beyond cookie-cutter offerings, and offer innovative multi-dimensional, experiential concepts that will excite even the most seasoned travellers and shoppers”.

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According to Chris Chong, Deputy Managing Director for CapitaLand Retail: “Malls in the near future will go beyond being a place just for transactions. Rather, they will be lifestyle hubs which integrate retail, entertainment and play under one roof.” Indeed, over the last few years, retail stakeholders have intensified their efforts to come up with new retail concepts.

The Shoppes at Marina Bay Sands is part of a successful integrated resort, which houses Singapore’s largest hotel, Michelin-starred restaurants and diverse entertainment venues. This retail destination, which houses 270 boutiques and restaurants under one roof, appeals to numerous tourists, business travellers, culture buffs and luxury seekers. As a whole, the integrated resort aims to give affluent visitors compelling reasons to return, whether it is to shop, dine or stay.

Another project to inject a different shopping experience is Design Orchard, which will open its doors in early 2019.

A development to nurture home-grown brands and profile design talent, upand-coming Singapore designers are being featured in the retail showcase on the first level.

Partners like Global Blue help us by providing insights into shoppers’ habits and preferences, and that is a powerful tool when combined with our own business intelligence.

John Postle, Vice President of Retail, Marina bay Sands, October 2018.

Last but not least, Jewel Changi Airport, which is also slated to open in 2019, will be Singapore’s “first multidimensional lifestyle destination to integrate Nature, Play and Retail elements on a large scale.” Both local and international shoppers can expect

Luxury transaction: any transaction amounting to or above 20,000€.

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to see a diverse mix of retail – “wellknown to new-to-market brands, as well as popular local household names will convene at Jewel Changi Airport.”

Thanks to an advantageous geographical location, Singapore remains a top-of-mind shopping destination for international and regional shoppers. As Singapore prepares to welcome more and more travellers, it is also crucial to engage with affluent globe shoppers. In fact, from Global Blue’s segmentation, while Elite and Frequent globe shoppers make up only 17% of visitors coming into the island, they are responsible for 51% of total TFS sales-in-store in Singapore.

To continue to appeal to these valuable shoppers, Singapore merchants need to provide exclusive privileges that these global shoppers are accustomed to elsewhere. John Postle, Vice President of Retail, Marina Bay Sands, already reflects on this in those terms: “Singapore holds a strong reputation as an authentic luxury shopping destination. As a result, today’s shoppers are starting to value, more than ever, the exclusive privileges that come with shopping in luxury flagship stores. These international luxury brands are able to cater to the demand by offering limited edition pieces to the region, personal styling services, and the ultimate VIP treatment in-store.

In this light, understanding shoppers’ profiles is key when developing tailored

Data collected from October 2017 to September 2018

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rewards and experience. Global Blue data collected during customers’ TFS journeys means that we can help enable merchant partners to formulate the right business solutions and targeted marketing campaigns. “The Shoppes has held many successful campaigns and events since its inception, whether to tie in with major seasonal holidays, or with the aim of positioning the luxury mall as an aspirational retail destination, says John Postle, “Shopper insights from associations such as Global Blue allow us to formulate marketing strategies to reach international shoppers, who drive the majority of our luxury retail sales.”

Partners like Global Blue help us by providing insights into shoppers’ habits and preferences, and that is a powerful tool when combined with our own business intelligence. John Postle, Vice President of Retail, Marina Bay Sands, October 2018.

Let’s get digital To reinforce the country’s lead as APAC’s luxury shopping destination, retailers are encouraged to leverage in-store payment options. In Q3 2018, Singapore launched a single standardised Quick Response (QR) code for digital payments and within the next six months, it will be adopted by 27 payment schemes. Many retail stakeholders in Singapore already accept a wide range of alternative payment options, such as Alipay and WeChat Pay, to cater to Chinese customers – Singapore’s most prolific

globe shoppers in 2018, representing 39% of total sales in store.

Leaving a lasting positive experience in customers’ mind should therefore be a priority for retailers. In an effort to create a seamless TFS experience, Singapore authorities have decided to implement an all-paperless digital TFS process. The new system, scheduled to go live in 2019, is in line with the country’s goal of becoming a smart nation and has been designed to encourage TFS spending and expedite tax refunds. From now on, the passport will be used as the only token to store all tax refund transactions, eliminating shoppers’ needs to hold on to numerous tax-free forms.

In parallel, Global Blue is planning to roll out its Mobile Customer Care (MCC) solution to guide globe shoppers to complete their TFS journey while in Singapore. Developed to cater to all shoppers, MCC delivers real-time notifications to globe shoppers’ phones or email addresses to assist them in completing the entire TFS process. For merchant partners, MCC is the ultimate solution to provide better service to globe shoppers.

Technology has become an integral part of consumers’ lifestyle and we recognise the benefits of leveraging digital integration to provide a more seamless shopping experience instore and beyond. Chris Chong, Deputy Managing Director, CapitaLand Retail, October 2018.

CHINA IN THE STARTING BLOCKS What is the evolution of the Chinese luxury retail market almost 2 years after Global Blue signed a partnership with Bank of China to operate Tax Free Shopping (TFS) in the country?

Luxury gets the green light The Chinese luxury market is putting out all the right signals to grasp globe shoppers’ interest and is ready, more than ever, to compete with its APAC neighbors. Back in Summer 2018, Beijing Finance Ministry’s decision to cut tariffs by 20% on imported luxury goods to drive national consumption in its home market was also the right signal for incoming globe shoppers to experience luxury shopping in China.

Rather than upping their retail prices, some of the world’s most famous luxury fashion houses including Gucci, Hermès and Burberry and other brands from Kering’s portfolio confirmed they would adjust their retail prices downward, between 3% to 5%, to pass on the benefit of this decision to its customers.

In 2011, luxury items sold in China were 68% more expensive than their overseas counterparts. China’s Fortune Character Institute found that the gap closed to 16% in 2017. In the long run, more harmonious pricing in China is required for international brands to drive their TFS sales in the country.

“The government has realised that any future economic growth is not going to come from basic manufacturing, investment or infrastructure projects and that it is going to come from consumers” Benjamin Cavender, senior researcher from China Market Research Consulting.

Getting Tax Free ready “The government has realised that any future economic growth is not going to come from basic manufacturing, investment or infrastructure projects and that it is going to come from consumers” tells Benjamin Cavender, senior researcher from China Market Research Consulting.

Back in 2017, the partnership signed between Global Blue and Bank of China was already a positive signal conveyed to international luxury brands and their customers. Global Blue’s TFS services in China includes a

consultancy service to retailers for TFS registration and in-store staff training regarding the issuing of tax-free forms and the remaining steps to complete the TFS process.

To start, a total of 259 stores in Shanghai signed up to the TFS scheme including major department stores, luxury fashion houses and local Chinese retailers. More recently, the China’s State Administration of Taxation approved 13 new TFS stores in Shanghai. With these newly approved stores, TFS authorised merchants now total 380 stores in Shanghai.

If the number of luxury store openings is anything to go by, then Chinese luxury market is well and healthy.

From March 2017 to September 2018, Shanghai’s high-end retail mall International Financial Center (IFC) welcomed 16 new high-end luxury fashion brands including Fendi, Thom Brown, Balmain and Loewe. This is nothing to be surprised of states Binglun He, journalist at Jing Daily, as “an increasing number of high-end luxury brands have stepped onto the battlefield in China. In particular, brands claiming both prestige on the international runways and online sales traffic have started to increase their store presence.”

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RECOVERING KOREA A negative macroeconomic environment in 2017 had largely impacted the Korean Tax Free Shopping (TFS) industry, with sales-in-store decreasing by -24% from January to September compared to the year before. In 2018, has the TFS industry recovered?

Many opportunities to grasp

Tourism highs In 2017, the Korean tourism industry was severely impacted after the Chinese government-imposed travel bans on group tours and cruise ships to Korea. Since 2014, China-South Korea had moved ahead of China-Hong Kong as the largest destination pair by total airline seat capacity in the APAC region; amounting to almost 24 million seats in 2016. Prior to the travel bans, China represented 50% of Koreans’ inbound tourism market according to the Korean Tourism Organisation. The Financial Times also reported a -48% drop in Chinese tourists to Korea last year to fall to 4.2 million in 2017.

In 2018, an improved diplomatic climate between Korea and China has been followed by a gradual lift of the travel bans. While the number of Chinese visitors to Korea has still yet to recover to levels seen prior to the travel bans, the latest data from KTO shows that the number of Chinese tourists to the country shot up to 38% in October this year compared to October 2017.

Overall, the number of foreigners who visited Korea rose +31% in October 2018 from a year earlier.

Macro retail update The Korean retail market is going through challenging times. In particular, the beauty segment, Korea’s retail backbone, is experiencing some major changes. The category relies heavily on Chinese consumption when Transactions above 20,000€

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Chinese globe shoppers travel to Korea and was understandably severely impacted by the Chinese travel bans.

In parallel, due to increasing online shopping demand from overseas, more than 800 brick and mortar standalone cosmetic stores closed during CY2018.

In addition, the new e-commerce law passed in China in August 2018 will prohibit commercial activities by individuals and will require that all online commercial activities be supported by a business license starting in January 2019. This law was passed to regulate Daigous’ business in the country, which includes purchasing goods abroad, such as buying goods in Korea, for the purpose of re-selling those goods in China.

Despite these challenges for Korean retailers, TFS activity in Korea remains positive. TFS sales in store (SIS) is increasing by +13% and +14% in terms of total TFS transactions for the period of January to September 2018 compared to the same period in 2017. In terms of categories, luxury performance has shown healthy growth with a +20% increase of SIS and +34% in total transactions.

Fashion performance is also positive, posting a +22% growth in terms of SIS and +10% increase in terms of total transactions. For nationalities, Chinese globe shoppers have increased their SIS by +16% to represent 64% of total TFS spend in the country followed by Japanese at 5% of the TFS business respectively.

There is no doubting the headwinds currently affecting the Korean retail industry. That said, the TFS market represents a growth opportunity for retailers, especially with tourism back on track.

In 2018, Global Blue Korea has been introducing new products and solutions to further strengthen Korea’s status as an attractive shopping destination, including increasing globe shoppers’ spending and improving retailers’ TFS processes instore. These solutions have been deployed throughout the entire TFS journey and include (in chronological launch order): February 2018: Mobile Customer Care (MCC) at 17 locations and to be available throughout the entire country in November 2018.

May 2018: - Credit card refunds at Global Blue’s Downtown Refund Offices (DTRO) - Alipay instant refunds at Global Blue’s DTROs August 2018: Issuing and cash refunding kiosks October 2018: Terminal issuing solutions which also provide the ability for globe shoppers to receive in-store refunds.

December 2018: Non-cash refunding kiosks to increase shoppers’ refund options.

AUSTRALIA: WHAT’S NEW DOWN UNDER? Australia’s retail industry is on a high. But the recent launch of Amazon’s Australian e-commerce platform is already putting pressure on bricks and mortar outlets. For fashion brands and retailers, in this increasingly competitive market, now is the time to create a welcoming retail environment to encourage high-flying tourists’ spending in their stores.

The retail context: some highs and lows The past seven years have been particularly positive for the Australian luxury retail industry, according to IBIS World, with 2016 peaking at +16% growth. For the next seven years, IBIS forecasts growth to be double that of the global retail market, between 6% to 8% per year, compared with the +3% annual growth forecast for the broader retail sector. International luxury brands have already identified the opportunities of the Australian retail industry and the iconic brands of Tiffany, Cartier or Chanel, have recently opened their Australian flagships in the cities of Melbourne and Sydney.

The larger retail sector however is experiencing some difficulties, as exemplified by veteran Australian clothing retailer Roger David’s shock closure announcement earlier in October. The explanations are many, including global competition, stagnant wages or rising fixed costs.

Retail experts also point at certain key Australian retailers’ struggle to identify their key target customers and propose a relevant retail offer, calling it a “corporate identity crisis”.

In parallel, the launch of Amazon’s

online local fashion platform in the continent in November 2017 had caused much concerns for brick and mortar retailers worried their customers might be redirected to the website. The shopping platform features 150 Australian well-loved brands, including Oroton, Tony Bianco, Cooper St, Lorna Jane, Third Form and Jaggar. To grasp Australian consumers’ attention, Amazon has also entered the market with an array of services including Amazon prime, the free delivery service, for a $59 annual membership fee, access to Prime Original streaming content with Prime Video and access to e-books with Prime Reading. The Amazon Fashion 2018 Local Brand Award was launched to attract more Australian brands onto the platform. The winner of the popular vote will be awarded a $75,000 marketing package to accelerate growth.

So, where next down under?

The luxury market growth prospects continue to be defined by two segments according to Deloitte. Firstly, by local domestic consumers and international students whose luxury spending in the country remains solid even during tough times. Secondly, luxury retailers can also benefit from their close proximity with the Asian market, in

particular China, driving “significant growth in purchases from high spending tourists visiting and shopping in Australia,” reports David White, National retail Leader at Deloitte.

The total number of international visitors to Australia has reached 8.4 million from July 2017 to June 2018, responsible for $42.5 billion spending in the country, reports the Tourism Research Survey in its yearly International Visitor report. Chinese visitors are driving Australia’s visitor arrivals, growing by +13% in the past year. They spend on average twice as much as other foreign visitors, $8,692 versus $4,393 and represent 30% of the Australia luxury market.

For brands with a presence in Australia, this confirms globe shoppers from the APAC region have great potential to become their next sales growth driver.

To assist merchants and acquiring partners in realising this objective, Globe Blue acquired Currency Select, which is headquartered in Sydney.

Currency Select enables merchant and acquiring partners to perform Dynamic Currency Conversion (DCC) and MultiCurrency Processing (MCP) transactions through ATMs, pointof-sale payment terminals and e-commerce channels with foreign customers.

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APAC PARTNERSHIPS Throughout 2018, Global Blue in Asia Pacific carried on strengthening its existing partnerships and creating new ones, with always one objective: to bring value to our business partners and to provide the most innovative Tax Free Shopping (TFS) services to our merchants and Globe Shoppers.

Here is a non-exhaustive recap of some of our collaborations with stakeholders from the retail, payment and tourism industries in the APAC region.

Alipay 2014: First collaboration to offer AliPay users the ability to receive their tax refunds to their AliPay wallet as part of a mailback process 2017: AliPay users can scan their phones at Global Blue refund points to receive instantly their tax refund onto their AliPay wallet 2018: Early in-store cash refund onto AliPay wallet rolled out in 10 countries and drive-to-store marketing campaigns launched • Every time, Global Blue was the first major TFS provider to launch each of these servicesand more features to be added in future

WeChat 2017: Global Blue and WeChat first collaborate to offer WeChat users the ability to receive an instant tax refund to their WeChat wallet 2018: • Global Blue’s Mobile Customer Care service (MCC) is directly integrated within WeChat Instant Messenger creating a single communication channel for any WeChat user looking for guidance and help throughout their tax-free shopping process • Instant tax refund on WeChat wallet rolled out to 700 Global Blue refund points around the world

UnionPay 2007: Start of the collaboration between Global Blue and UnionPay to provide tax refund services to UnionPay cardholders Openings of VIP lounges in Europe: Platinum and Diamond UnionPay cardholders are granted access to Global Blue’s downtown VIP lounges located in European capitals to enjoy an array of exclusive services. For partner brands, it is the occasion to promote their latest collections in a luxurious environment in window displays or through multimedia channels.

2016: Launch of UnionPay early-refund in Global Blue merchant partner stores 2018: Global Blue’s tax refund services are implemented within UnionPay’s tax refund portal, allowing users to enroll with the Global Blue Shop Tax Free Card, locate various Global Blue refund points and make use of a tax refund calculator.

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CTrip 2014: Global Blue and CTrip first collaborate to provide partner merchants with marketing solutions 2018: • Pilot launch of a drive-to-store concept using Ctrip’s marketing campaign platform encouraging Ctrip users to visit Globe Blue merchant partners’ stores and receive benefits, such as an extra tax refund.

• Ctrip users to receive their tax refund into their Ctrip wallet via Global Blue’s Tax Back Home service

ForwardKeys Global Blue and ForwardKeys have entered into a partnership, whereby ForwardKeys provides air arrival and overnight booking forecasts. Global Blue combines its proprietary data and 3rd party data to deliver the “90 days Tax Free transactional outlook” for various countries across Europe and Asia Pacific and communicates this information to its merchants and partners on a monthly basis.

NATIONALITIES

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GROWING INTRA-REGIONAL TRAVEL Asian travellers’ appetite for regional travel continues to grow, fuelled by new routes and growing affluence. This comes with great benefits to the Tax Free Shopping (TFS) industry, as more than 90% of the TFS business in the APAC region is driven by APAC nationalities.

Research by Visa finds that outbound tourism in Asia-Pacific is outpacing income growth in the region, with Asia-Pacific households accounting for a third of globe travellers, up from a quarter of travelling households in 2006.

The UNTWO reports that 80% of travel in Asia-Pacific is now intra-regional, driven by the growing numbers of Chinese travellers, and their enthusiastic foreign spending. In total, 247m regional travellers explored AsiaPacific destinations in 2017, with trips to regional destinations increasing +7% between 2005 and 2016 per year, compared to a +5% increase in trips outside Asia-Pacific.

The Pacific Asia Travel Association visitor forecast for 2022 suggests that intra-regional travel will continue to dominate Asia-Pacific arrivals, with growth led by Chinese and Hong Kong outbound trips. China is forecast to generate an additional 64.5m travellers from 2017 to 2022, followed by Hong Kong with 13m more outbound tourists, South Korea with 8m, Thailand with 4.3m and India with 3.2m.

Fourteen of the world’s 20 busiest routes serve Asia-Pacific’s regional travellers, according to air travel analysts OAG. The busiest route, Kuala Lumpur-Singapore, saw 30,537 flights in the 12 months to February 2018. Other top routes include Hong Kong-Taipei, Jakarta-Singapore and Hong Kong-Shanghai, all operating over 20,000 flights a year. Seoul, Osaka, Bangkok and Tokyo anchor other key regional routes. Research

by Expedia and ARC indicates that the popularity of arrival airports varies according to travellers’ spending levels.

For economy passengers, Seoul and Taiwan are among the leading travel hubs, while premium passengers favour destinations such as Singapore,, Shanghai and Tokyo.

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The increasingly adventurous Asia-Pacific traveller, and the growing number of travel routes are likely to draw them to secondary spots – merchants should prepare for their arrival now.

Who? Where? Why? Western brands and retailers may look forward to Golden Week travellers arriving in Europe and the Americas, but Chinese travellers are increasingly favouring Asia Pacific regional destinations for their holidays.

According to Hotelbeds Group, six out of the top 10 destinations for Chinese travellers were within the Asia-Pacific region: Thailand continues to be most popular, followed by Japan, Singapore, Indonesia, Malaysia, and South Korea.

While low-cost travel routes are increasing tourism across the region, the growth of intra-regional travel faces some challenges. Overtourism is a particular concern, with picturesque destinations such as the Great Wall of China, Bali and Kyoto overflowing with tourists, who often outnumber locals and cause significant transport and environmental problems. In response to protests from locals, tour operators are beginning to draw travellers to less populated sites, such as visiting local charities and more remote sights. National and regional tourism boards are making efforts to spread the number of tourists across their landscape to spread the benefits (and challenges) of mass tourism. For example, the Tourism Authority of Thailand is promoting “hidden gems” to attract tourists to less well-known parts of the country, and alleviate the pressure on Bali. Japanese regional governments and social media

influencers are promoting undiscovered attractions such as firework festivals, regional liquor specialities and natural beauty spots.

While the benefits and sometimes challenges of regional travel growth have largely been felt in major destinations todate, the increasingly adventurous Asia-Pacific traveller and the growing number of travel routes are likely to draw Asia Pacific tourists to secondary spots – merchants should prepare for their arrival now.

CHINESE: ONLINE AND READY TO SHOP Once considered as a homogeneous group of consumers, irrespective of individuals’ expectations and needs, the Chinese globe shopper market has evolved to be much more complex to grasp. In 2018, does the stereotypical Chinese globe shopper still exist?

Digital knows no bound If anything, Chinese globe shoppers distinguish themselves for their extra agility and tech savvy attitude towards digital mediums, even compared to their local peers. When it comes to shopping, Juliette Duveau from consultancy company The Chinese Pulse, estimates that 80% of the time, Chinese consumers will discover a product via a digital mean, so much so that digital resources are present throughout their entire retail experience. This includes relying on digital resources to find the best deals, compare prices and the best location to spend.

with 91% confirming they would be willing to spend more if an overseas merchant accepted Chinese mobile payments.

Post-purchase, Chinese consumers are eager to share their retail and product on social media channels, group chats and websites.

Average TFS spend in APAC

€532

Playing it on their terms Chinese consumers’ retail journey is highly penetrated by digital mediums.

For stakeholders from the retail or travel & tourism industries, it means many more opportunities to penetrate and influence Chinese consumers at key stages of their purchasing decision.

This is especially relevant and critical, as Chinese globe shoppers transition to be more mature spenders, expressing new aspirations regarding products and services on one side, and on the other, allocating a more important share of their travel budget to lifestyle activities such as dining and arts.

Yet, if their initial road to purchase seems highly independent and uncontrived, Ruonan Zheng notes that for Chinese “word-of-mouth on social media is a key factor to influencing consumers’ purchasing decisions” be it by following a Key Opinion Leader (KOL) or by posting a trial picture on a social media platform or group chat.

Total e-commerce sales in China At the till, payment options are crucial reached an all-time high of $1 trillion to lock in the purchase decision. For in 2017, larger than the US and UK Chinese travelling abroad, mobile combined. In a context of a global, payment is more competitive now deemed offer, when Chinese a much more consumers’ retail secure option journey is becoming and equally increasingly fast important as and automated, price discounts when e-commerce reports a platforms and socialNielsen media-born-shops and Alipay are competing for 2018 survey. physical retailers’ Although sales revenues, payment the debate is not method does so much around not determine digital replacing the amount physical stores, they spend, but rather about Juliette Duveau, the report creating a virtuous The Chinese Pulse indicates that ecosystem between 77% of Chinese both environments. tourists paid more using mobile Further, the challenge for retailers is to payments on their last trip overseas reapply meaning and emotion behind

“Shopping is very much part of Chinese lifestyle, and they are very much inclined to share their purchases on social media channels”

Progression of transaction numbers vs. 2017

+35%

Progression of SIS spend vs. 2017

+31%

TFS spend repartition: Fashion transactions / W&J transactions

65% 35%

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the act of shopping across both digital and physical environments.

In a Rapaport report, Emerging Communications CEO Domenica Di Lieto remarks that it is crucial for retailers “to get it right when selling to Chinese people, whether in China or elsewhere…[They] hate clumsy translations, overly direct promotions, and marketing that makes presumptions about buyers.” When done right, using digital mediums is the occasion to transform the purchasing

act into an unforgettable shopping experience. Online it is the occasion to ensure a certain presence and to further promote a brand’s image at a relatively low cost through exclusive brand content. Off-line, it can be the occasion to adopt new formats, be it in the shape of store pop-ups or include inside the store itself some digital facilities such as try-on mirrors.

Digital is also the occasion to interact differently with customers and influence their next purchase. For the

Chinese market, Global Blue is able to support its partners in communicating with and engaging international travelling Chinese consumers, whether to raise brand awareness, drive footfall to store or deliver specific promotions.

Global Blue publish destination specific guides in print, online, mobile and work with carefully chosen marketing partners such as Ctrip, China’s leading online tour operator to provide brands with effective marketing opportunities.

SAFE SPACE SPLURGE: A SHELF FOR THE LITTLE RED BOOK The Little Red book or Xiaohongshu, was first created for like-minded luxury Chinese shoppers to flaunt, write and share reviews about their shopping experience. The app which first revolved around beauty and cosmetics products later extended its interest to luxury Fashion items and lifestyle locations such as hotels and restaurants. Soon enough, the posts included hyperlinks to brands’ e-commerce section.

The ideal gateway between content consumption and e-commerce.

For luxury brands, what first seemed like the risqué invasion of their brand image and mainstream communication channels, soon turned to their advantage. First, because of Chinese preference and trust in consumer reviews. Second, the content generated by these customers was free. The Little Red Book is now the number 1 ranking cross-border e-commerce app in China.

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JAPANESE: THE COMEBACK With the improvement of Japan’s economy over the last 2 years, Japanese consumers have rekindled their shopping habits to spend $33 billion (JPY 3.6 trillion) in 2017. For retailers wishing to grab a slice of these globe shoppers’ spending power, getting to know the delicate Japanese globe shopper is crucial.

Raising international shopping to an art When it comes to shopping, Japanese consumers are known for their rather cautious ways and a challenging group of consumers to grab.

Their retail journey is much less permeable to social media influence or the response of an emotional urge than their Chinese counterpart. Rather, Ruonan Zheng argues that they are driven by “a very rational mentality”.

When considering investing in a luxury product, craftmanship, design or style and service are the main motivations behind the purchase decision.

When it comes to getting the information, their favored medium is through direct interaction with the brand via online ads and content (excluding Social Media). In fact, in 2017, Japan was the second biggest market of the world when it came to online advertising.

Japanese slow adoption to luxury shopping on e-commerce platforms is a testimony to their purchasing habits. In store interactions are still an intrinsic part of their shopping journey and, as much as they expect shop floor staff to be knowledgeable about the product they sell, they should also be “kind and easy to talk to” according to McKinsey. In parallel, for 93% of them, direct credit card payment is still the preferred payment method in Japan, with WeChat Pay payments only making 1% of total sales by Japanese.

Positive attitude Looking ahead, Japanese consumers are rather pessimist regarding their spending power. Only 1 in 3 consumers report that they will have more disposable income in the coming years and plan on increasing their luxury spending, contrary to their other 7

APAC neighbors. Yet, their TFS spend is gaining positive momentum. In numbers, from January to September 2018, their TFS SIS has increased by +11% including a +24% increase in transaction numbers compared to the same period a year before. Their average basket amounts to €408, lower than their neighbors even compared with developing countries of Indonesia and India whose average TFS spend sits at €506 and €432, respectively.

Nonetheless, their luxury performance records the highest progression from all nationalities observed in the report, an impressive +39% SIS compared to the year before, explained by the revival of their Watch & Jewelry (W&J) performance showing lower transactions versus prior year (-5%) but an increase in total sales in store for this category (+33%).

Average TFS spend in APAC

€408

Progression of transaction numbers vs. 2017

+11%

Progression of SIS spend vs. 2017

+24%

TFS spend repartition: Fashion transactions / W&J transactions

69% 31%

Transactions above 20,000€

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VIETNAMESE SMILING AHEAD In the country, positive macro-economic factors are driving national consumption as well as Vietnamese spend when travelling abroad.

As Global Blue’s best performing nationality in APAC in 2018, what chance is there for retailers to reiterate these results in the future?

The Vietnamese economy is growing on a stable currency and inflation as well as benefitting from world oil price hikes. These factors have contributed to boost national spending; in fact, the government has already announced national GDP will exceed its +6.7% growth target for 2018, the fastest in the region.

Breaking open the Viet market In this developing economy, material goods are still very much associated with happiness and contribute to building Vietnamese self-image. In fact, according to a Nielsen report, Vietnamese spending on clothes is now their third priority, right after food and saving. They also perceive international brands to be of higher quality and are willing to buy a foreign product if the price is similar to its homegrown equivalent. At the same time, the growing number of international brands in Vietnam are helping to strengthen Vietnamese Globe Shoppers’ awareness of foreign products. Therefore, when traveling abroad, Vietnamese globe shoppers are curious and amenable to buying international products.

In 2016, the World Economic Forum included Vietnam’s Ho Chi Minh City and Hanoi as part of their top 10 cities list to have successfully embraced technological change for growth.

According to a Google survey, 8 out of 10 Vietnamese consumers had a presence online in 2015. They expected almost 100% of Vietnamese households to be connected to the Internet in five-years’ time. Now that product information is within reach and with a greater choice of products available online, increasingly connected and informed Vietnamese globe shoppers provide an opportunity for retailers to grab their attention and loyalty.

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Smiling ahead Vietnam’s middle class is supposed to reach 44 million people by 2020; which is projected to be the fastest growth in the APAC region. Increased disposable income means Vietnamese travel more often than ever. In fact, outbound trips from Vietnam have nearly doubled in the last 6 years, to reach 7.5 million trips last year, with China, Cambodia and Thailand the top APAC destinations according to Euromonitor. From $3.5 billion spent abroad in 2012, this number rose to $8 billion in 2016.

With an average spend of €606 and with a +10% increase of their SIS, Vietnamese are the definite surprise TFS nationality in 2018. Most importantly, their sales in store rose by +10% during the year, with their number of transactions showing a +3% increase. Vietnamese globe shoppers’ luxury performance spending in store rose by +25%, the third best performance after Indians and Japanese. Both the Fashion and Watch & Jewelry categories show a similar trend; with the number of SIS rising but a decrease in transaction numbers.

In other words, Vietnamese globe shoppers are shopping for less but more expensive items. Some good news for the luxury industry and a definitive sign that the Vietnamese market is maturing into a more sophisticated group of consumers.

As shown above, there are many positive signals from the Vietnamese globe shopper market. Given this, it will be important for retailers to be prepared to cater to this emerging TFS nationality going forward.

Average TFS spend in APAC

€606

Progression of transaction numbers vs. 2017

+10%

Progression of SIS spend vs. 2017

+3%

TFS spend repartition: Fashion transactions / W&J transactions

57% 43%

MATURING KOREANS Amidst smoother diplomatic relations with their local neighbors, it would seem that South Korean globe shoppers are eager to travel and shop again in in the APAC region.

growth in terms of Koreans’ sales in store spending in Japan from January to September 2018 compared to the same period in 2017.

Their total TFS spend across APAC is healthy, as both their sales in store amount and total transactions registered a +11% progression from January to September 2018 compared to the same period in 2017.

Many luxury levers

Positive vibes only Newly appeased diplomatic relationships with local countries is comforting Koreans to rekindle with traveling and shopping in the APAC region. Already in 2017, the Bank of Korea reported the record high number of $28bn spent by Koreans abroad, a +9% progression compared to the year before. An increase of disposable income (+14% compared to 2016) and favorable currency exchange rates, especially against the Japanese yen, coupled with cheaper airfares, is boosting the number of Koreans traveling abroad as well as their TFS spending.

The number of Koreans travelling abroad has risen consistently over the past 4 years. By the end of 2018, 2 out of 3 Koreans are expected to travel abroad, the equivalent of 30 million according to the country’s Ministry of Justice. Their top destination remains within their neighbors, with Japan ranking number one. This preference is visible in their Tax Free Shopping (TFS) activity with Koreans representing 5% of total TFS spend in Japan the second best performing nationality after Chinese (76%). Yet it represents a +20% 8

South Koreans shoppers in their 20s are becoming more prone to spending on luxury items and services reports Tmon, the mobile commerce company.

This emerging trend concerns luxury products and high-end services in fashion, food and travel. Certain categories of items are proving to be popular within this group of young consumers. For example, the sales of Moleskin premium notebook ranges or luxury home electronic appliances such as Blomberg dryers or Balmuda’s steam oven toasters have seen double-digit growth since 2015. Many factors can be held accountable for these results, such as higher quality products, sleek design and brand awareness are now key considerations in the younger generations’ decision to purchase.

Yet, if Korea is now considered as a high-income country, Koreans’ average TFS spend is the lowest out of all nationalities observed in the region sitting at €295, behind Thailanders (€374) and Japanese at (€408). That said, their luxury transaction activity from January to September 2018 have grown by +12% while SIS has growth by +19%. In other words, Koreans, especially the ones in their 20s, are maturing in their spending habits, seeking higher quality products.

The challenge for retail and luxury stakeholders is to grasp the attention of these promising globe shoppers.

Average TFS spend in APAC

€295

Progression of transaction numbers vs. 2017

+12%

Progression of SIS spend vs. 2017

+11%

TFS spend repartition: Fashion transactions / W&J transactions

78% 22%

Transactions above 20,000€

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SHINING A LIGHT ON THAILANDERS, INDONESIANS AND INDIANS In 2018, Thailanders, Indonesians and Indians show healthy Tax Free Shopping (TFS) growth, including delivering higher average TFS purchases than nationalities such as Japanese and South Koreans. For the future, travel and retail stakeholders’ goal should be to unlock the potential of this cohort of globe shoppers and in doing so these nationalities can become a major driver of TFS growth in the Region.

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Thailanders

Indonesians

Indians

After a year-long mourning period following the death of King Bhumibol Adulyadej of Thailand in October 2016, in 2018, Thailanders are travelling again in APAC. From January to September 2018, Thailanders’ transactions grew faster than the amount spent in store, contributing to a rather low average TFS spending per transaction compared to the rest of the nationalities in the region, just before South Koreans at €296.

Indonesians display negative trends in terms of their TFS sales in store and number of transactions. Back home, the Indonesian Rupiah has hit a record low since 2016 against strong US dollar, in turn impacting transaction numbers and average spend.

Yet their average spending per transaction is one of the highest in the region at €506, right after Chinese at €533.

Indians’ TFS progression is rather slow compared to other developing countries. The assumption is that this market still has some maturing to do when it comes to shopping abroad. Still, Indians show a significant average spend per transaction. For retailers, the challenge may just be to increase awareness around TFS schemes which in turn will activate the large potential of Indian globe shoppers.

Average TFS spend in APAC

Average TFS spend in APAC

Average TFS spend in APAC

€374

€506

€432

Progression of SIS spend vs. 2017

Progression of SIS spend vs. 2017

Progression of SIS spend vs. 2017

+8%

-10%

+1%

Progression of transaction numbers vs. 2017

Progression of transaction numbers vs. 2017

Progression of transaction numbers vs. 2017

+16%

-9%

+3%

TFS spend repartition: Fashion transactions / W&J transactions

TFS spend repartition: Fashion transactions / W&J transactions

TFS spend repartition: Fashion transactions / W&J transactions

60%

58%

60%

40%

42%

40%

GLOBAL BLUE

Global Blue Jacques Stern - Chief Executive Officer Greg Gelhaus - Head of Asia Pacific Group Communications & Editorial Domitille Pinta - Head of Group Communication Alison Cerles - Editorial and External Communication Officer Elena Kachaami - Junior Communications Project Manager Gwyneth Holland - Contributing Editor Alison Farrington - Contributing Editor Data Mathieu Grac - VP Intelligence Strategy Muhammad Firdaus Bin Masdar - Senior Data Scientist, Campaigns STUDIO & Publishing James Morris - Publisher Fabio Gervasoni - Art Director Global Blue SA Route de Crassier 7, CH-162 Eysins, Switzerland Corporate Registration number: 5565726923 info@globalblue.com

Global Blue would like to thank all contributors for their valuable time and insights

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