Why are luxury goods sold at a higher price in China?

Why are luxury goods sold at a higher price in China?

More and more Chinese consumers choose to go abroad to buy luxury goods. American and European luxury department stores have become an indispensable stop in the program for Chinese tourists. Yet the vast majority of luxury brands are sold in China. Why do Chinese consumers go so far for their luxury purchases? The answer is simple: the prices of luxury goods abroad are much lower than those practiced in China. This pushes consumers to turn to foreign markets.

The Chanel “Timeless Classic Flap” handbag in France retails for 3100 euros (3839 dollars), but in China the list price is 37,000 yuan (about 5850 dollars), which is a difference by 34%. With such a price difference, it's no wonder Chinese consumers are flocking to buy luxury overseas.

In fact, luxury goods in China not only have a high price, they are rarely on sale. On the other hand, sales are a regular ritual in foreign markets. A Chinese woman who has stayed in France for a long time indicates that major luxury brands such as Louis Vuitton and Gucci are always on sale during major festivals.

China is replacing traditional European and American countries to become the main driver of luxury consumption. Major international luxury brands have moved to China, so why are the prices of luxury goods in China higher than abroad?

Why are luxury goods sold more expensively in China?

Zhou Ting, a luxury expert in China, explains the three main reasons for the issue of high prices of luxury goods in China:

First, the presence of customs duties. Tariffs on luxury goods cause a big difference in price.

Second, distribution costs. This cost includes traffic costs, including mall rentals and a variety of management fees.

Third, marketing costs. Major international brands spend surprising amounts on marketing, more than the cost of production.

Given the vast difference in prices of luxury goods in China and abroad, how to reduce the costs for consumers wishing to buy luxury goods in China? We must first settle the question of taxes, even at the risk of losing tax revenue. In addition, domestic enterprises should be encouraged to acquire foreign luxury brands in product design to give more consideration to domestic demand and reduce brand promotion costs, as well as the import of all kinds of costs, while reducing margins.