Why Do Luxury Brands Worry About Price Cuts?

For a long time, luxury brands have been following the ostrich policy on price differentials. Obviously, the price difference destroyed the exquisite and advanced sense of luxury goods; in the low pixel pictures, the brand value was hurt in buying the wrinkled bags of the water customers; when the Chinese travelled around the world found their favorite brands abroad and had discount labels, they were surprised and even angry.

CHANEL's move is pushing pressure on peers - it's time to make a decision. "Others will adjust the price for three years, and CHANEL will adjust to the end. Long queues of shops, the media are coming, causing blowout. When other families react, no one is concerned about the big sale, and CHANEL is already in the bag. A former Chinese executive said a multinational fashion brand. In his view, the practice of CHANEL can be described as "smart" in two words.

He felt that the most painful moment was LV, GUCCI and PRADA, and watched the long queue of shops next door from the family.

THE BEST, OR NOTHING, can be applied to the price adjustment of luxury goods: THE FIRST, OR NOTHING -- the medal called "pioneer" has been swept away by CHANEL, and the follower can not earn so many eyeballs. What they need to think now is whether they should follow the price adjustment for long-term business.

But the executives and managers of the luxury goods industry first asked the question: is the price cut in China? Do we have to compensate the customers who paid the bill last month? We have always said that our watches can be insured and depreciate, and how should we explain to the guests? The biggest problem now is that the number of customers in China is less and the guests are not coming. What is the fundamental reason? The price can be solved.

The price of products is different, the market share is different, the company structure is different, and the analysis of the cold market in China is different. They can't find a standard answer. They have doubts.

Luxury brands go far across the ocean, wearing aristocratic dreams. In China, they do not get much cheaper.

They began to endure the torment of time and formalities from the customs; they wanted to find a shop to sink in the mire like rules; to bear the cold shoulder of the public's "profiteering", and to be destroyed by the Shanzhai.

In the northeast of China, a luxury brand was smashed into a pie. Its name is D&G. Some northeast customers feel that the two big letters on the belt show clearly that this person is the real big brother (DaGe).

A young woman from a wealthy family received a LV purse from her husband. She looked embarrassed because Chinese people thought that red was "money breaking" and the lining of the LV wallet was bright scarlet.

Two years ago, BOTTEGA VENATA gave himself a new Chinese name "Bao butterfly home", hoping to change the wrong name and confusion in China, and standardize communication. When the new name was released, it was drowned out by indiscriminate criticism.

In China, you may be inexplicably burning, but this is a small probability event, you may also suffer from it, because some of you completely lose your head. Making decisions in China, the situation may slide in your unexpected direction, not to mention the overall reduction of such a big thing.

CHANEL price adjustment means success is too early. Therefore, the luxury brands who have been in the Chinese market for many years are still afraid of making decisions. However, after CHANEL, many industry leaders have shown their attitude.

Patek Philippe very simply throws a price adjustment plan similar to that of CHANEL, which is accurate to all regions: the US has cut 7%, China has cut 18%, the euro area has risen 7%, and Switzerland has dropped 5%. From these fragmented data, it is easy to see that Patek Philippe's decision is not only a matter of thought, but also a "calculation". It is a balance found after careful consideration of various factors.

Please note that Patek Philippe is strikingly similar to the CHANEL background. The owners of Patek Philippe are the Sten family. They are not founders, but they love to make an issue on the concept of "inheritance".

It seems that family businesses are more intolerable of price differentials, more willing to protect their brand value, and are considerate of future generations. In addition, unlisted Private Companies are less powerful and more forceful in implementing such a big thing.

Hermes said there was no price adjustment plan. "Even the price adjustment will be in the middle of 2016." They fear that price adjustment will hit European customers. It is true that only by lowering the price of the Chinese region will the company lose profits and the price of Europe will offend the old customers in Europe. How can this balance be grasped?

Although a large proportion of the shares are in the hands of family members, Hermes is a publicly listed company. Their restrictions include: 2015 the budget for the fiscal year has already been worked out, and suddenly the price adjustment will completely upset the budget. At the beginning of your home, you will tell investors how much money you expect to make, although it is only expected that investors will also be regarded as an informal commitment; if suddenly a sharp turn in the middle of the year, the global price adjustment, the financial results at the end of the year... It's hard to predict.

If Hermes wants to adjust the price, the quickest way is to start making preparations now, taking full account of the effect of price adjustment in the next year's budget making, and then start in the next fiscal year. Therefore, there is a news headline that reads: Hermes will cut prices until the year of monkey.

According to the latest news, Cartire, another luxury brand and its brand, has announced that the global market price adjustment will lead to a 5% price cut in the Hongkong market.

PRADA, who has just released a bleak transcript, has made a statement. Modify price Because the growth in Europe and America can not afford China's deficit, and it wants to save the Chinese market. But don't be too happy. PRADA, a listed company, is strictly regulated by the rules as well as Hermes, and it is difficult to make a comprehensive and large-scale price adjustment immediately. It was also learned that PRADA There are many internal pressures in the near future. It may be unintentional to embark on such a big change.

To sum up, the future luxury brands that decide to follow up and launch price adjustment may be: family businesses and unlisted Private Companies.

Even if the brand is willing to adjust the price, whether it has the ability to complete the difficult adjustment of price adjustment is also a doubt.

primary Summit group Chief executive of the Asia Pacific region, Gu Teng, said that the way of brand distribution may also be related to this matter. If you have a part of the business is retail, part of the wholesale, price adjustment requires wholesale and business related primary, two, three level agents to communicate, each link share the number of ups and down - not as convenient as all direct retail brands.

A senior tax expert who worked in four major accounting firms said that the process of price adjustment still needs to be challenged by customs and tax authorities. A CHANEL handbag with a retail price of RMB 38200 yuan. If the price is reduced to RMB 30000 yuan, how can we adjust the import price of customs? If the import price is lowered, customs duties will be reduced accordingly, and the customs may not release it. If the import price remains unchanged, the reduction of the retail price will inevitably lead to the compression of the profit space, and the income tax will be discounted, and the Inland Revenue Department will probably not agree. The expectation of customs and tax is the opposite direction. Is there any way you can make a change that is acceptable to both sides? "CHANEL does not have enough preparation process to do this. It is absolutely impossible. They may have already hired a lot of accountants and tax experts to help them make plans and withstand challenges from all sides. The above senior tax experts say that the other links can only be imagined.

MICHAEL KORS, COACH, BURBER-RY... Do not forget these brands, they are facing huge price difference for a long time, they are all listed companies, wholesale and retail channels. What will they do for the price difference? "Those who are more familiar with the luxury brand will face more serious problems." Hemmerle, a luxury goods analyst, said that when Chinese people came to these brands or other countries, they found that the brand would not only be much cheaper, but also appeared in Outlets, which had no sense of dignity in China and would feel "cheated".

The reality is cruel. Customers may forgive CHANEL and Hermes, but they will not forgive light luxury brands. "The price difference between brands in different countries is too large to be sustainable. Eventually, it will hurt the brand itself and customers will go away." Hemmerle said.

There is no exception to this question. Some brands will follow up the price adjustment immediately; some will take time to minimize the financial impact and adjust prices at different stages; others may go down the ostrich. Different choices determine the fate of China in the future and even the whole brand.