What: Chinese tourists are back, but they now prefer experience and discovery over purchases that can be made online.

Why it is important: Department stores need to focus on experience, experience, experience (and know how to make money out of it).

Chinese tourists, once known for their shopping sprees in global luxury destinations, have changed their travel and spending habits post-pandemic. The new generation of travelers, mostly under 40, are veering away from traditional shopping-focused tourism, favoring unique experiences and places discovered through social media apps like Xiaohongshu (China's Instagram). This shift has impacted companies reliant on "travel retail," such as Estée Lauder and Shiseido, leading to a drop in shares and profit forecasts due to decreased spending by Chinese tourists in their preferred travel retail segments.

Luxury retailers, including Harvey Nichols, are feeling the pinch with reduced shopping by Chinese visitors in Hong Kong, prompting the closure of one of its stores. The pandemic has also accelerated e-commerce and luxury brand presence in China, reducing the price gap between China and tourist destinations, further influencing shopping behavior.

Despite a dampened interest in shopping, there's an uptick in travel, with young Chinese tourists focusing on creating personal travel narratives rather than purchasing goods. This trend is partly attributed to China's weakened economy impacting discretionary spending, with more Chinese opting to shop domestically.

However, there are signs of a gradual return to travel, with a surge in travel package sales during China's recent Double 11 shopping festival. Companies like Samsonite are optimistic about the eventual full return of Chinese outbound travel, preparing for a resurgence by the end of 2024.

Chinese tourists are back. They just aren’t shopping like before.