Chinese Tourism May Explain Canada's Increase in Luxury Retail [With Infographic]

  Hermes, Toronto. Photo: bloor-yorkville.com

Hermes, Toronto. Photo: bloor-yorkville.com

Luxury brands continue to open Canadian locations, and a spike in Chinese tourism may be partly the reason. The number of Chinese visitors to Canada is substantial, and is expected to triple over the next five years. Chinese visitors are now the second-largest contributors of tourism dollars to the Canadian economy and as Canada is the world's third most popular destination for Chinese tourists, retailers can’t help but take notice. 

Jeff Guthrie, Chief Sales & Relationship Officer at Moneris, says that Canada is only third to New Zealand and the United States for popularity among Chinese tourists. Of the roughly 500,000 Chinese who visited Canada in 2014, about 55%, or 270,000, visited British Columbia. The second most visited province was Ontario, with 38% or about 186,000 Chinese visitors. Mr. Guthrie says he expects Chinese tourism to triple by the year 2020 and remarkably, the number of Chinese applications for Visas to come to Canada were up 51% in January of 2015 over the year before. 

  Photo via chinadaily.com

Photo via chinadaily.com

Retail accounts for about 77% of all spending by Chinese tourists in Canada, while only 7% goes to lodging and 8% to dining. Spending by Chinese visitors continues to grow each year. In 2013, the average amount spent by each individual Chinese visitor averaged $1,804, up from $1,630 in 2010. Mr. Guthrie says that these numbers may even be higher if purchases for friends and family are factored in.  

  Rendering: McArthurGlen Designer Outlets, Vancouver

Rendering: McArthurGlen Designer Outlets, Vancouver

As China’s population gains affluence, residents are looking to see the world. Mr. Guthrie says that China now boasts the world’s largest ‘middle class’, consisting of about 600 million people. The Chinese are spending an estimated $164 billion internationally annually, more than any other nation. Luxury goods, apparel and uniquely Canadian items are especially popular.

Mr. Guthrie explains how Moneris has partnered with Chinese card company China UnionPay to help Canadian retailers benefit from the forecasted increase in Chinese tourism. UnionPay is the world’s largest card issuer, with over 4.7 billion in use to date. Canadian retailers can now include China UnionPay in their payment systems at no extra cost, and fees for retailers are lower than those of traditional cards such as VISA and Mastercard. Mr. Guthrie explains how it makes sense for Canadian retailers to include the China UnionPay option, as its familiarity will encourage Chinese tourist patronage.

  Gucci, Bloor Street, Toronto. Photo: bloor-yorkville.com

Gucci, Bloor Street, Toronto. Photo: bloor-yorkville.com

Having studied luxury retail in Vancouver and Toronto, we were particularly interested to learn more about why Chinese tourists are coming to Canada to buy luxury goods. We spoke with luxury retail expert Farla Efros, Executive Vice President and COO of HRC Advisory. Ms. Efros explained that Canada is an attractive shopping destination for the Chinese for a variety of reasons. The price difference of luxury goods in China vs. Canada, for example, can be as high as 45 to 51% when factoring in import duties, consumption tax, and VAT. Chinese shoppers believe that goods bought in Canada are less likely to be counterfeit and furthermore, the breadth and selection of luxury goods is often better in North America. Getting a tourist visa to visit Canada is relatively simple, enhancing Canada’s reputation as a Chinese visitor destination. 

Ms. Efros went on to explain how Canada could become an international luxury goods destination with the lower dollar, making goods bought here even more of a bargain. She said that luxury brands already recognize Canada's ability to attract top-spending tourists and as a result, these brands continue opening free-standing flagships. Ms. Efros also explained how mono-brand luxury stores in Canada will see an expanded selection of products, including exclusives, as sales continue to increase. Chanel, for example, creates a limited quantity of some items and then limits their distribution. Canada may see more than its fair share of exclusives if sales continue to increase. Furthermore, brands such as Valentino, Saint Laurent Paris, Brunello Cucinelli, Versace, Tod's and other brands continue to seek Canadian retail space, recognizing potential sales from both affluent locals as well as increased tourism. 

If what Mr. Guthrie says is correct, Canada will be seeing substantially more Chinese tourists over the next several years. Ms. Efros notes that Chinese shoppers seek out prominent brands, both for themselves as well as gifts for others. Given the projected increase in spending among Chinese tourists, we may now be better able to explain why Toronto’s Bloor Street West and Vancouver’s Alberni Street will continue to see luxury brands signing new leases. 

Below is an infographic provided by Moneris, providing insight into Chinese tourism in Canada.