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M-Commerce Takes Sales From Struggling Tourism Retail
U.S. retailers are grappling with dwindling sales, attributed to the sluggish return of international shoppers and the surge in online shopping.
Atchinson Globe reports that “the arrival of foreign tourists to the United States has only recovered 73% so far this year since pre-pandemic levels, according to the U.S. Travel Association (USTA), and many retailers that depend on foreign shoppers are struggling to make ends meet.” Because of the lack of tourists, the USTA predicts that in 2023, American retailers will lose $6 billion in spending.
Before the pandemic struck, foreign visitors directed 21% of their expenditures toward U.S. retail stores, culminating in nearly $25 billion. The UTSA indicates that shopping was the primary activity for over 80% of these international visitors. Notably, Asian tourists, particularly from Japan and China, were the top spenders, contributing $2.8 billion and $2.6 billion, respectively, in 2019.
Until May 2023, strict COVID-19 restrictions hampered the inflow of foreign capital into U.S. retail. Although the restrictions were lifted in May, the anticipated retail recovery has been lethargic. This sluggishness lines up with the U.S. Travel Association’s expectation for a “slow return of tourist retail spending.”
However, Heidi Theis, who operates the Benvenuto Travel Design Firm travel agency, has observed an uptick in international travelers and their expenditures. This leads to a perplexing question: If travel agencies are thriving, why aren’t U.S. retailers reaping similar benefits?
One plausible answer lies in the global e-commerce boom, which soared to over $5.7 trillion in 2022. Giants like Amazon dominate the online retail scene, but Chinese platforms like Taobao and Tmall overshadow them in terms of merchandise value. The convenience of shopping through smartphones, now dubbed “m-commerce” for “mobile-commerce,” could be further denting physical store sales. In 2022, 70% of global retail website visits were made through smartphones.
With the proliferation of m-commerce, especially in countries like China and South Korea, Asian tourists in the U.S. might be gravitating toward window shopping rather than making actual purchases. They can easily order items online, anytime. The evolving dynamic suggests that international tourists may prioritize their travel experiences over shopping sprees in American retail stores.
Despite this, “the United States remains the preferred choice for travelers looking to shop during their vacation,” according to Travel Pulse. Their cited data concludes that “the U.S. was the largest contributor of retail tourism to gross domestic product (GDP) in 2019, totaling $34.7 billion. Despite the global pandemic, America retained the No. 1 spot in 2020 with $17.5 billion. In 2021, retail tourism contributed $23.9 billion to the country’s economy.”
Discussion Questions
What measures do you think retailers can take to entice tourists to spend money while visiting stores and shops in the U.S.? Are there are other contributing factors that might be impacting tourists’ spending in the U.S.?
Poll
Loading …BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Bob Phibbs
President/CEO, The Retail Doctor
I am not sure I buy the m-commerce thesis. The truth is that tourist arrivals are still not back to pre-pandemic levels and this continues to damage retail sales to tourists – especially in destinations like New York. On top of this, many of those who do travel are a bit more constrained and are more likely to stick to budgets rather than splashing out and buying on impulse. Don’t forget that travel itself has become more expensive as have tourist activities like dining out. These things are the real reasons behind the crimp.
It always startles me that when sales are down it must be because Ecom is up. There are a lot of factors at play here not the least of which is China’s economy is not doing so well. Coming to the states, and having an experience cannot be duplicated in the meta-verse or scrolling through endless product offerings online.
The combined impact of high inflation and the strong U.S. dollar is making international retail tourism more expensive. Retailers may want to offer international travels special discounts to make it more enticing to invest in a retail trip to the U.S.
M-commerce versus e-commerce. Sounds like splitting hairs to me. There are so many dynamics in the economy right now that are impacting discretionary spending that it’s tough to attribute much weight to m-commerce as some new variable that wasn’t having an impact last week, or month, or year.
We live in a world driven by headlines, hype and single-variate analysis. Reality requires much more than that. I agree with my colleagues that much more is at play here and knowing what to do requires knowing what’s wrong. IRL, physical retail commerce is still the juggernaut with ecommerce accounting for less than 20% of global retail sales even after years of hype that it would destroy traditional retail. M-Commerce accounts for around two-thirds of “ecommerce” and in the US it accounts for less than half; not surprisingly, Asia leads the way with nearly 80% of ecommerce sales conducted on mobile (as per various online sources including Statista). In the words of Gene Katz in Apollo 13, “let’s work the problem people. Let’s not make things worse by guessing.”
Let me join the chorus of BrainTrusters shocked to see the word “m-commerce” in a headline. This is a complicated question and the answer defies simplistic thinking.
In an era dominated by online shopping, mobile commerce and a slow revival of international tourists, U.S. retailers finding it difficult to lure visitors into their stores. Following strategies might help U.S retailers to entice tourists and revive in-store spending-leverage social media and online platforms popular in Asia, provide multilingual staff, signage, and product information, offer special discounts or promotions for purchases made by Asian tourists and collaborate with travel agencies, influencers, or brands popular in Asia.
Certainly, factors like economic uncertainties, changing consumer priorities, fluctuations in currency exchange rates, geopolitical tensions and concerns about safety & health regulations may influence tourists’ spending behaviors in the U.S.
Why claim tourism is “thriving” – and how do we end up there from “uptick”? – when the objective info (73% recovery) clearly shows it is not?? Still, this would seem to be rather area specific – the Bay Area was hammered by a reduction in Asian tourists during Covid (and normal hasn’t yet returned) – and industry specific (does WalMart or Taco Bell care about this topic…I doubt it). There’s not much a restaurant or tourist trap can do to juice sales if people simply aren’t there, but I would point out m-commerce works both ways: there’s nothing – well, beyond shipping costs, duties and other regulations – to prevent marquee brands from selling on those same mobile phones.
As others have mentioned, there are many factors at play here, including the state of economies around the world and the overall dip in tourism. To create an exceptional shopping experience for tourists, retailers should prioritize convenience, seamless delivery, and exclusivity. Offer hassle-free item delivery to shoppers’ destinations to help alleviate the burden of carrying items home. Keep the shopping process straightforward and efficient, and entice visitors with uniquely American items they won’t find anywhere else. Ensure the experience goes beyond mere product acquisition and encompasses entertainment and the distinct atmosphere of physical stores in key locations. This approach is designed to make shopping as convenient and memorable as possible for tourists.