Chinese shoppers, and their favourite card, fire up luxury sales

Tourists are expected to spend $800 million on their UnionPay cards here this year, writes Peter Cai.

Stickers bearing a discreet red, blue and green-banded symbol with UnionPay in English and Chinese are appearing on heavy glass doors and tills at many high-end shops and department stores throughout Australia.

Upmarket retailers are chasing the growing army of globetrotting Chinese tourists who are spending billions every year on designer goods by accepting the bank card that most middle-class Chinese hold: UnionPay

The latest to join the fray is David Jones, which is battling weaker consumer sentiment.

The retailer is making its stores more Chinese-shopper friendly. Mandarin-speaking saleswomen can be easily identified with their Qantas-style name tag featuring a Chinese red flag, indicating their ability to speak a second language.

"We have long recognised that as retailers we are competing internationally and the ability to tap into the lucrative Chinese markets is a great strategic advantage for us," David Jones chief executive Paul Zahra said.

The 175-year-old department store sold its first batch of goods to UnionPay cardholders this week. One of its first customers was the chairman of the Chinese card giant, Su Ning, who bought some books.

He was in Australia inspecting the southern outpost of his expanding global empire, which saw 500 billion yuan or $84 billion of transactions last year outside China.

Mr Su was optimistic about the future growth of his company in Australia on the back of booming tourism and educational links. He expects the total value of UnionPay transactions here to reach about $800 million this year. Transactions over the UnionPay network are expected to double, he said.

Chinese tourists are becoming an important source of revenue for international retailers as consumers in the West tighten spending. Figures by the Boston Consulting Group estimate China will be the top market for luxury goods, worth $US245 billion annually by 2020.

"Overseas merchants pay careful attention to Chinese consumers. For example, foreign visitors are responsible for a significant portion of consumer spending in Australia and the Chinese are the most important part of this group," Mr Su told BusinessDay.

One of UnionPay card's single largest purchases in Australia last year was about $500,000, when a Chinese tourist bought a few watches at a boutique shop. In another case, a wine buff bought a dozen cases of his favourite drop at a Hunter Valley winery for $110,000.

A UnionPay sales manager said these kind of transactions were not possible on normal credit cards, or reserved to those with an exclusive black Amex card, which is only available by invitation.

Chinese tourists spent $4.2 billion in Australia last year. It is expected to grow to a $10 billion market at the end of this decade, according to Tourism Australia figures.

The Chinese card giant's ambition is not only limited to serving Chinese tourists abroad. It has also signalled its intention to take on global card giants such as Visa and MasterCard by offering competitive fees and better services to non-Chinese cardholders.

Mr Su said card issuers and merchants - especially across parts of Asia - often complained to him about Visa and MasterCard's duopoly. It was clear they wanted more competition in the marketplace, he said.

The company spun off its overseas operation and formed UnionPay International to take advantage of the growing overseas market. It has also started issuing cards in Australia in partnership with local banks.

UnionPay is expanding rapidly in Australia with help from big Australian banks such as Commonwealth Bank and National Australia Bank. The acceptance rate of the card in shops and hotels is expected to increase from 12 per cent to 40 per cent at the end of year.

Although Chinese travellers are on a shopping spree around the world, Mr Su warns that the good times won't "last forever" for foreign retailers.

Indeed, a recent crackdown on corruption in China has already translated into a drop in revenues for big international luxury retailers as well as their share prices.