Monday, June 02, 2014

Fighting for the Chinese consumer: the tax free threshold

Nederlands: Bijenkorf, het originele bestand s...
Nederlands: Bijenkorf, (Photo credit: Wikipedia)
De Bijenkorf, one of the larger Dutch shopping malls, is trying to refocus its retail strategy on the international consumer, including the Chinese. Some of its stores in second-tier cities will be closed or sold off to Primark. We visited their store in The Hague and saw they made some progress, especially when it comes to tax free refunds, although it is still lagging on other points.
Most obvious missing from the current stores are some major brands, including Louis Vuitton,  PradaGucci and Pinko, to mention a few. Without a fair selection of those brands, all the rest might be in place, but what does it matter if you do not sell.
What works out well, is the free Wifi connection at the Bijenkorf, a must for Chinese customers since they have to consult with their friends back home real time before they can purchase good for themselves or their friends. (I mentioned this before here.)
What was a bit of a positive surprise was their tax free policy threshold. In most stores we visited non-EU citizens can get a refund of the VAT - a major draw for Chinese customers since they suffer back home from high taxes on luxury goods. Mostly you can only get your money back (that is how Chinese customers talk about tax refunds) if you spend at least a few hundred euro, sometimes even three hundred before the tax refund kicks in. Refunds only work in one store, so if you visit a store of the same brand, earlier purchases mostly can not be consolidated.
That might not be a problem if you sell expensive watches or diamonds, but when you core business is fashion, purchasing enough for a tax refund is hard. De Bijenkorf realized that and lowered their threshold to €50 euro. And the advantage was measured out loudly, even by Chinese announcement over their in-store speaker´ system.
It might be a trade off for the retailers. If consumers have to buy up to €300 worth of goods in your stores to get their fund, you might sell a bit more on items those visitors did not intend to buy. But if you offer your visitors a lower threshold, they might be more eager to come to you stores, especially if the neighbors maintain higher thresholds.
Getting some brands those Chinese visitors would actually want to buy, does help De Bijenkorf even more.
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