US, China trade dispute may impact mobile payments as luxury sales take hit

The U.S. trade dispute with China may be seeping into the mobile payments arena, as major brands begin to report lower spending from the critical market of inbound tourists from that country, a region that has largely driven the international growth of mobile payment acceptance in ecommerce and physical retail.

Tiffany & Co. earlier this month reported a 5% decline in same store sales and a 3% drop in net sales due to a combination of foreign exchange headwinds and a dramatic slowdown in spending due to a reduction in foreign tourists.

Tiffany CEO Alexandro Bogliolo said on a conference call with securities analysts that the company believes that the strong dollar had a meaningful impact on first quarter retail sales related to foreign tourists in the U.S.

"Our internal estimates indicate that those tourist sales represent a low double-digit percentage of our American retail sales," he said. "Those sales were down approximately 25% from a year ago and with sharper declines among Chinese tourists, which in fact were even more pronounced than declines in the second half of last year."

Mark Erceg, executive vice president and chief financial officer at Tiffany, said the company was being impacted by the soft tourist spending and to a lesser extent by higher tariffs placed on jewelry products that it exports from the U.S. into China.

Preferred spending

The Chinese inbound market to the U.S. is considered a critical growth engine not just for U.S. retailers in general, but the growing use of mobile payments. Major retailers from around the world, including the U.S., have enhanced their point-of-sale and ecommerce systems to accept payments from major Chinese mobile payment services, including UnionPay, Alipay and WeChat Pay.

"We know where Alipay and WeChat Pay is an option, Chinese tourists will opt for it, as they are increasingly their payment of choice back home where the two methods combined account for almost one-third of retail spend," Windsor Holden, an analyst at Juniper Research told Mobile Payments Today via email.

According to a 2019 report from Nielsen Co., more than 140 million Chinese tourists made overseas trips last year, a 13.5% year-over-year increase. The report showed that 60% of Chinese tourists paid using their mobile phones.

The research also shows that 94% of tourists would be more willing to pay with their smartphones if these payment methods became more accepted in overseas markets.

Chris Renton, chief growth officer at SnapPay, a Canadian firm that helps integrate North American merchants with Chinese payment platforms, says there is still a huge opportunity for companies to grow their business with these mobile platforms.

"While Chinese consumers would absolutely prefer to pay on mobile, there are limited places [Chinese] mobile methods are accepted," he told Mobile Payments Today via email.

Alipay has entered a series of agreements in recent months to expand its reach in North America. In February it announced a deal with Walgreens to allow customers to use the mobile payments platform at the pharmacy chain’s point-of-sale.

In Canada, Alipay entered an agreement with Canadian fintech SnapPay to facilitate payments at FoodyMart, a Toronto-area grocery chain

A spokesperson for Ant Financial said the company did not have any transaction data for the U.S. market that it could share publicly.

In April, RiverPay Inc. entered an agreement with luxury fashion brand Brooks Brothers to facilitate payments at its retail stores using AliPay and WeChat Pay.

Cover photo: iStock

Original author: David Jones