×

Once registered, you can:

  • - Read additional free articles each month
  • - Comment on articles and featured creative work
  • - Get our curated newsletters delivered to your inbox

By registering you agree to our privacy policy, terms & conditions and to receive occasional emails from Ad Age. You may unsubscribe at any time.

Are you a print subscriber? Activate your account.

Retail Sales Are Down: Blame the Tourists

By Published on .

At Macy's, international tourist sales are down 9%.
At Macy's, international tourist sales are down 9%. Credit: John Taggart_Bloomberg

Just in time for the holiday rush, retailers are dealing with a decline in shoppers from overseas. Multiple marketers, including Macy's, Ralph Lauren and Tiffany & Co., cited drops in tourist traffic and same-store sales on recent earnings calls.

"We've attributed the overall [same-store] sales weakness this year to lower foreign tourist spending," said Mark Aaron, VP-investor relations at Tiffany, on a conference call reporting second-quarter earnings earlier this month. The jeweler, which is in the midst of a rebranding effort designed to modernize its blue-box image for the millennial shopper, posted sales of $959.7 million, a 3% increase over the year-earlier period, though same-store sales fell 2%. Alessandro Bogliolo, a veteran of Bulgari who most recently ran Diesel, starts as chief executive of the luxury chain in October.

Declines in tourist spending seemed to catch Macy's by surprise. In the second quarter, the struggling department store chain reported international tourist sales to be down 9%, a greater drop than in the first quarter of the year. Same-store sales for the period fell 2.5%.

"We were surprised by the second quarter and we're still analyzing whether we think that will continue," said Karen Hoguet, chief financial officer at Macy's, on a conference call. "My guess is it very well could." Macy's is in the midst of a marketing overhaul, which includes a revamped loyalty program. The chain named BBDO as its creative agency of record last week.

While tourists also pulled back from Ralph Lauren, the decrease was not as great as last year, according to Jane Hamilton Nielsen, chief financial officer. She noted that foreign tourist traffic was down 15% last year, but in the first quarter of this year, the brand's most recent, the declines were in the high single-digit range. The retailer, which has strived to boost sales and entice younger customers, hired its first chief marketing officer earlier this year.

Some of the tourist blame can be attributed to less spending by the Chinese. New York-based consultancy Oliver Wyman recently released a report that noted an 8% drop in shopping by Chinese travelers in 2016 compared with 2015. While that consumer is still spending, fewer dollars are going to tangible goods, particularly for "daigou"—when shoppers buy in bulk to resell at home. Cross-border ecommerce, along with lower prices on high-end brands in China, have helped persuade Chinese tourists to spend on other things like experiences, rather than products, according to Hunter Williams, a partner in the retail and consumer goods practice at Oliver Wyman.

"When stuff is easier to buy at home, especially the luxury goods, there's nothing specific you have to buy while traveling," said Williams. "As these brands become more available in other markets, especially in the developing world, there's less of a reason to buy."

Williams notes that the U.S. could see fewer Chinese visitors in coming months as Washington continues to clamp down on travel visas. That trend could have wider implications as well. "Broadly speaking, there's some discussion of the attractiveness of the U.S. as a destination for foreign tourists given the current political situation," he said.

Most Popular