And when the wind blows…

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Welcome to The Moodie Davitt Report Interim Beijing Bureau.

I’m at the Yuyang Hotel, a facility that I am sure is well-known to many travel retail executives due to its proximity to CDFG’s headquarters. It’s an interesting though somewhat faded alternative to the homogenised blandness of so many international hotels, full of character in the public areas, but largely devoid of it in the bedrooms (and I have tried two, as the first smelled like an overflowing ash tray despite supposedly being a non-smoking room).

One reviewer on Trip Advisor described the bedroom carpet as “looking like an old cat fur” but the location is good, the breakfast room and reception marvelously atmospheric, you can feel the history of the place, and there are some great restaurants nearby (noticeably the famous and wonderful Ding Tai Feng where I dined last night).

I flew into Beijing from Shanghai where I had the pleasure of attending (and addressing) Yaok’s tenth anniversary celebrations on Tuesday night, which also featured the company’s annual Luxury in China Awards. Yaok, which grew out of the Fortune Character Institute founded by Steven Yao and Tina Zhou (shown below on screen), is China’s leading luxury network. Look out for my story on the latest Yaok rankings of luxury brands in China, there are a few surprises.

As I told the audience, “Everything in the modern-day duty free and travel retail industry pivots around the Chinese. Talk to retailers all around the world today, and China (and the Chinese traveller) is front of mind.”

It’s certainly front of mind for me. I spend an increasing amount of time in this amazing country and each time I come away with a huge appreciation for the long-term view of business (and life) that so characterises the Chinese.

That’s certainly the approach of CNSC, the state-backed travel retailer and Sinopharm (Fortune 500 company) subsidiary, which is embarking on the most concerted expansion programme in its history. I had breakfast yesterday with Chairman Robert Lee and there is no doubting either his determination to make CNSC a powerful contemporary force in Chinese travel retail, or the government’s support of the organisation.

Robert Lee: Taking CNSC to new heights.

As I have written many times, the Chinese authorities are determined to maximise domestic consumption. The government is deeply concerned at the levels of Chinese spending abroad and will do everything it can to encourage its citizens to spend at home, including in duty free. That’s precisely why CNSC is expanding its downtown retail network all around China right now. Robert Lee says the organisation is building for the day that its stores – which allow returning travellers to shop for up 180 days post their return from overseas – really start to accelerate under government patronage.

“When the wind blows,” was his evocative, very Chinese way of saying that big opportunity lies ahead and that CNSC must be ready.

CNSC’s challenge is to convince brands that its business is incremental to the local market and not a threat to it. Estée Lauder has been the biggest supporter to date; other major houses are reviewing their positions. CNSC is doing its best to win their support by reiterating how carefully it manages customer eligibility and allowances and that its offer actually enhances a brand’s domestic presence.

To do that it must raise its retailing game, the very reason it is upgrading 11 downtown stores over the next two years (the new-look Nanjing store will open in coming months) and building new ones over the coming five years. Expect CNSC, too, to play a bigger role in the country’s airport retail sector. In 2017 CNSC opened its first-ever airport stores – 572sq m and 295sq m arrivals duty free shops at Chonqqing (August) and Dalian (November) airports.

CNSC also participated in last year’s tender for the blockbuster seven-year duty free contract at Shanghai Pudong and Hongqiao International Airports. Though ultimately unsuccessful (the contract was retained by China Duty Free Group-controlled Sunrise Duty Free), the bid underlined the seriousness of CNSC’s intentions.

Robert Lee is also a senior executive of CNSC’s parent company, Sinopharm (China Pharmaceutical Group Co), China’s biggest pharmaceutical health group. By any standards, Sinopharm is a giant organisation, ranking number 194 in the Fortune Global 500 rankings for 2018. It boasts China’s largest drugstore chain with some 4,412 stores across 60 large and medium-sized cities and it’s clear from an hour in Mr Lee’s company that its ambitions for duty free burn bright. Watch this space.

I also had the pleasure of catching up with Jason Cao, owner and Publisher of DutyFreeExpert, the WeChat platform service which has become the most influential Chinese-language travel retail sector media. Jason held several senior roles at Sunrise Duty Free from 2001 until 2013. He then founded his own company, Shanghai-based Amberich International, providing a range of training, consulting, channel management and headhunting services to China’s burgeoning travel retail sector.

Last year Jason and I launched i免税中国 (literally ‘Love Duty Free, Love China’) on WeChat, a fortnightly news service about the Chinese and international travel retail market. I’m pleased to say that from next month the service will become daily. Again, watch this space.

And so from Shanghai to Beijing, where the ice on the Liangma River (top picture) outside my hotel illustrates just how cold it is here (-5°C as I write).

I was met on arrival last night by Mirko Wang, Founder, Chairman and CEO of pioneering Chinese duty free price comparison app Jessica’s Secret, and Executive Vice President (and founding investor) Michael Tong.

With Michael Tong (left) and Mirko Wang after dinner at Ding Tai Feng in Beijing.

The story of Jessica’s Secret is remarkable. From a start-up four years ago, the service will soon break through the 1 million user mark. All over the world, Chinese travelling shoppers can be seen price comparing items in duty free shops using Jessica’s Secret on their mobile platforms. Pricing data covers over 40 countries, 400 stores and 15 million SKUs. Prices are updated every half hour with exchange rates.

Jessica’s Secret is not only winning consumer fans but also plenty of support from the travel retail industry. Brands are starting to realise the power of advertising via the app, while in Thailand Jessica’s Secret has rebuilt King Power International’s Chinese website, with a resultant huge improvement in user experience, page loading time and pre-order sales.

Mirko is a very driven entrepreneur, determined to refine and extend his service. The business has now extended into consultancy services and tech solutions and will soon go live with a new retail price analysis programme for airports, brands and retailers. Further enhancements of the non-Chinese language versions of the app are in the works. Look out for my interview next month with Mirko Wang and Michael Tong, it might make you rethink the way you communicate with Chinese travelling consumers. Jessica’s Secret is a secret no longer.