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Why are luxury goods more expensive in China?

(People's Daily Online)

08:21, August 16, 2012

Photo/Chins Daily)

More and more Chinese people are traveling abroad to buy luxury goods. Various luxury stores in the United States and Europe have become must-visit places for outbound Chinese tourists, and it seems that one has not truly been abroad until he or she buys several luxury goods overseas. In fact, most luxury brands have stores in China.

Why do Chinese consumers go all the way to another country to buy products that are also sold in China?

Because international luxury brands have long set much higher prices for their products in China than in many other countries, forcing Chinese luxury consumers to turn their eyes to foreign markets.

Why luxury goods are cheaper overseas

The retail price of a Chanel Timeless Classic Flap bag is 3,100 euros, or 3,839 U.S. dollars, in France, but is marked up 34 percent to 37,000 yuan, or 5,850 U.S. dollars, in China. The price of a Louis Vuitton Speedy 30 bag that sells for only 500 euros, or 619 U.S. dollars, in Europe is marked up 36 percent to 6,100 yuan, or 964 U.S. dollars, in China. The prices of same products vary considerably from country to country.

No wonder Chinese consumers are flocking abroad to buy luxury goods.

In fact, luxury goods in China are not only priced high, but also rarely discounted. By contrast, it is common to see discounted luxury goods in certain foreign countries.

Ms. Lin who lives in France said that major luxury brands such as LV and Gucci often offer discounts of 30 percent to 50 percent on many items during holidays and festivals. Many Gucci bags sell for around 300 euros in Europe, while the price of the same bag is usually marked up about 50 percent to 5,000 yuan in China. In addition, off-season luxury items are often sold a discount in certain foreign countries.

"As the prices of luxury goods are much higher in China than in many other countries, many people are traveling abroad to buy large amounts of luxury goods," said Yi Shaohua, an associate research fellow at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences, adding that the Chinese people have spent the most on luxury goods overseas for several consecutive years.

According to a Bain & Company's report on China's luxury market, Chinese spent 50 billion U.S. dollars on luxury goods overseas in 2010, which was nearly five times more than luxury goods sales in China, making the country the world's largest consumer of luxury goods.

Taxes and marketing costs significantly pushed up the prices of luxury goods

China is gradually replacing the traditional European and American countries to become the main force of luxury consumption. The international luxury brands have also paid more and more attention to Chinese market. Why are the luxury goods more expensive in China than in other countries?

Taxes, distribution costs and marketing costs are the main reasons, said Zhou Ting, expert of luxury goods and dean of Research Institute for Fortune Character. The distribution costs, namely the circulation costs, refer to rents and managing fees. The annual reports of the luxury groups show that the marketing cost accounts for a large proportion of the cost price of luxury goods and even is higher than it.

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Leave your comment1 comments

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wende at 2012-08-1871.255.83.*
It is become Chinese consumers are too much in a huury to beat everybody else to have such items. Producers and marketers will have to bring down their prices if the demand is less than supply. In China, demand is several times more than supply. Therefore, marketers will not offer 'sale'. The west knows Chinese just grab whatever foreign made they can lay their hands on. Therefore, their products are sold at MSRP (manufacturers' suggested retail price) to Chinese consumers and they make tons of profit.

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