Locals feel their home brands have turned their back on the struggling country by offering incentives and discounts to foreigners, but stores are doing what they can to keep their businesses afloat.
Tourists come to Spain for sun and sights. Retailers are working to also put shopping on the map.
Mango, El Corte Ingles SA and other Spanish retailers are hiring translators, offering special tourist discounts and boosting ads in travel magazines to ensnare foreigners and buoy sales as cash-strapped locals trim spending.
With unemployment more than 26 percent and gross domestic product on track to shrink for a second year, Spain is entering its sixth year of an economic slump as it struggles to recover from the demise of a decade-long housing boom.
“Tourists were always important to us but they have become much more relevant since the crisis started,” said Ignacio Sierra, chief corporate officer of Cortefiel SA, a fashion retailer with more than 20 stores in Madrid.
Tourism is one of the few bright spots in Spain’s economy. Spending by foreigners climbed 5.7 percent to 55.6 billion euros ($74 billion) last year, with the daily average outlays per tourist climbing to 108 euros, according to the country’s Institute of Tourism Studies. The number of visitors rose 2.7 percent, led by the English, French and Germans. The tourism numbers for January will be released tomorrow.
Rafael Araujo, a sports radio commentator from Colombia, is one of those shopping foreigners. He says he’s grateful that his trip to India and Egypt closed with a stopover in Madrid last month, because when he shops in Spain there is no need to haggle about price and he finds the staff helpful.
Araujo, who can spend an entire day trolling Madrid’s El Corte Ingles flagship store, budgeted $5,000 to spend on his trip on items including jewelry and electronics, as well as a soccer jersey for his grandson. “We love shopping in Spain because we find everything without much hassle,” he says.
Mango, the closely held fashion chain which hired Australian model Miranda Kerr for its 2013 spring/summer campaign, has boosted in-flight magazine advertising as well as at airports. They’ve also offered discounts to cruise passengers.
“Tourists are now a much more important target for us in Spain because it helps offset lower spending from local customers,” Enric Casi, Mango’s general manager, said in an interview by phone on Feb. 6.
As local demand plunged due to the economic crisis, El Corte Ingles, Spain’s largest department store chain, has increased the number of interpreters to serve visitors from China and Russia and opened a Chinese-language website. It now accepts China UnionPay, the nation’s bankcard network, and its flagship store on Madrid’s Paseo de la Castellana offers an iPhone and iPad app in English and Chinese as well as Spanish to guide visitors. The chain offers a 10 percent tourist discount on many items excluding food and books.
“The crisis has changed the way most retailers treat tourists, a target that had only been relevant to some luxury brands before,” says Ramon Sole, a marketing professor at IE Business School in Madrid. “Foreign visitors are now a top priority.” Some retailers are also starting to partner with travel agencies to include shopping as part of the vacation experience, according to Sole.
Spain’s economy is set to shrink for a second straight year after Prime Minister Mariano Rajoy imposed the harshest budget cuts in the country’s democratic history.
Some measures are meant to work in retailers’ favor, though. An extension to legal store-opening hours was approved in July. Shops of more than 300 square meters (3,229 square feet) are now allowed to remain open 25 percent longer during the week and can open their doors an extra two Sundays a year.
“Sales have increased since we open more days in some key touristic cities,” said Cortefiel’s Sierra. “It was a just shame that tourists couldn’t go shopping because stores were closed.”
The bias toward tourists hasn’t gone unnoticed. Locals who must cope with high unemployment and lower disposable income and still pay regular prices say they aren’t pleased.
“It would be fantastic if I were able to get such discounts,” said Pablo Dominguez, a 17-year-old student from Madrid who teaches violin to earn extra cash. “It’s good to have people come to our country, but we are the ones suffering from the crisis so we should also receive incentives. It’s simply outrageous.”
Tourism continued to grow despite the crisis, accounting for 11.1 percent of gross domestic product in 2012, according to estimates by Manuel Figuerola, a director at Nebrija University in Madrid. That compares with 10.8 percent the year before.
Half of what visitors spend in Spain goes to restaurants, bars and hotels, while 26 percent is used for transport and leisure, including tickets for shows and souvenirs, according to the latest data available at Spain’s National Statistics Institute. The remaining 24 percent, worth 11.3 billion euros, is spent on goods and services.
That’s not enough to make up for the drop in local consumption because “it’s still a small part of their business,” says Fraser Ramzan, an analyst at Nomura in London. Retail sales fell 10.7 percent in December.
Still, it’s a reprieve, and Araujo says the discounts and targeted services will keep him coming back.
El Corte Ingles stores, which sell items ranging from socks to sunglasses in brightly lit displays with friendly staff, feel like “a Walt Disney theme park for us,” says Araujo, the Colombian traveler. “We spend a whole day there.”
With assistance from Alexandra Ho in Shanghai, Angeline Benoit and Charles Penty in Madrid and Harumi Ichikura in London. Editors: Marthe Fourcade and Celeste Perri.
To contact the reporter on this story: Manuel Baigorri in Madrid at [email protected] To contact the editor responsible for this story: Kenneth Wong at [email protected]
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Photo credit: Rebajas, or sales, at the El Corte Ingles flagship department store in Madrid, Spain. Roberto García Fadón / Flickr