Why People are Vacationing at the Mall
It’s called “shopping tourism.”
This article originally appeared on fortune.com.
It’s a drab, cold, thoroughly English November morning, but it’s not dampening the mood among the visitors to Bicester Village, a retail destination about an hour from London. Throngs of excited shoppers, many of them tourists from Asia, dart in and out of immaculately kept cottage-style shops in search of bargains from high-end designers like Prada, Alexander McQueen, and Saint Laurent. The U.K.’s only outlet mall, Bicester Village carries surplus luxury fashion, marked down by a third or more. But it tries very hard not to have the feel of a discounter. There are no untidy piles of clothes to rifle through; no group dressing rooms with harsh lighting. Instead, the 130-odd stores aspire to the atmosphere of a Beverly Hills boutique, with plush seating; doting, multilingual sales staff; and valet parking.
Make no mistake: Bicester Village is not exactly exclusive—no destination with 6.3 million visitors a year could claim that—but it is clearly aiming for an upscale crowd, who scoop up Ugg boots knocked down to £110 (about $170) from £190 ($290).
Nearly 10,000 busloads of Chinese tourists have descended on Bicester Village in 2015 alone. The numbers seem certain to grow as a new rail link from London to Bicester Village—the first to connect the capital with another English city in more than 100 years—opened in October.
Bicester Village is riding a worldwide wave of “shopping tourism,” a by-product of the vast shift eastward and southward in global wealth in recent years. As affluence spreads across Asia and the Middle East, people are not only traveling more but also indulging the urge to splurge while on the road. The average non-EU shopper at Bicester and its sister malls spends about $900 per visit, according to the village’s owner, Value Retail, a privately held company that operates nine such villages across Europe and one in China (a second outlet mall in China is coming next year).
Desirée Bollier, Value Retail’s chief executive, admits that the concept of shopping tourism is, at heart, only a refinement of an age-old phenomenon.
“Wherever people have gone,” she notes, “they’ve always had an urge to bring stuff back.”
Even the terrorist attacks that shook Paris in November won’t change that. “People still crave communal experiences,” she says. “This is a new reality that we all have to learn to live with.” Bollier points out that the 3,000 Chinese tourists who were due that week at Value Retail’s village outside Paris were offered the option to cancel; few did.
Certainly the figures seem to back up her optimism. The United Nations World Tourism Organization (UNWTO) estimates that the number of people traveling internationally more than doubled in the past 20 years, to 1.13 billion in 2014. A big motivator for all that travel has been shopping tourism. For Value Retail, that has been reflected in annual sales growth of more than 10% for the past 39 straight quarters. That’s a remarkable achievement considering it is essentially an old-economy business (brick-and-mortar retail) operating in a low-growth environment such as post-crisis Europe. The mix—two parts high-end international brands like Gucci to one part up-and-coming local names like Anya Hindmarch—ensures that the experience is what Bollier calls “a voyage of discovery” for tourists.
As with much else with regard to the luxury sector, it’s the behavior of the Chinese customer that is the key variable. Even the most modest assumptions about the growth in outbound Chinese tourism over the next years are head-spinning: Fewer than 10% of Chinese currently have a passport, according to most estimates, and the number of outbound Chinese visitors is expected to double from 2013 to 2020, to 200 million.
Chinese tourists are already the world’s biggest spenders, according to the UNWTO, dropping $165 billion on their travels in 2014, 50% more than Americans, a distant second. No wonder the U.S., the U.K., France, Germany, Italy, Canada, and Thailand have all eased visa requirements for Chinese tourists in the past two years.
For Value Retail and competitors like McArthurGlen and Simon Property Group, the key is to follow the tourists: VR’s La Vallée Village in France is right next to Disneyland Paris, and it will repeat the trick next year when it opens next to Disney’s new resort in Shanghai. In the same vein, McArthurGlen broke ground last month on a 120-store designer outlet mall in Provence, a region that hosts 30 million tourists a year.
It may seem paradoxical that upscale outlet malls like Bicester and La Vallée are thriving on Chinese demand at a time when one luxury company after another is blaming the slowdown in China for bad quarterly figures. But the contradiction is only superficial. President Xi Jinping’s anticorruption campaign may have hit conspicuous consumption at the very top end of the social pyramid, but it isn’t stopping the rising, spreading wealth of a middle class eager to snap up luxuries at a discount. It’s these shoppers, along with ample numbers from the Middle East, and, yes, America, who are driving the success of places like Bicester Village. The middle class may not spend quite so freely as the super-rich, but when it comes to making money, there’s still no substitute for volume.