LV China's Pricing Strategy Is Not Sociable And Selling In China Is The Most Expensive In The World.

After luxury giants such as Chanel chose to cut prices in the mainland to narrow the global market price gap, LVMH group was unmoved. CLSA CLSA recently revealed that the price of the same Louis Vuitton Speedy 30 without shoulder strap handbags was the most expensive in the world, the highest price in the mainland market, 1.6 times the French price in the local market, and 1.43 times the price of the French local market in Hongkong, where CLSA had recently conducted a price survey of the most popular LV Louis Vuitton Speedy 30 in the main market country.

The most expensive market in the world

Although Chinese consumers contribute a lot to LVMH group's performance, Chinese consumers want to buy a LV product, while overseas shopping or purchasing is the first choice.

A survey of the price of handbags by LV found that the price of China's official website is higher than the price of domestic purchasing websites, and the price of domestic purchasing websites is much higher than that of foreign e-commerce platforms. LV a MONOGRAM series LOCKIT medium handbag (model M40606) is priced at 24300 yuan on LV China official website, the lowest price on behalf of Jingdong is 23770 yuan, and the price on eBay is 11442.01 yuan.

In the first half of the LVMH group's earnings report, the performance of the Chinese market and overseas markets showed a trend of ice and fire. European market growth in the first quarter was 10%, two in the 14% quarter, 9% in the first quarter, 12% in the two quarter, 10% in the first quarter, and 34% in the two quarter. In the first half of the Greater China region, sales fell by 10%.

The LVMH Group believes that the decline in sales in the Chinese market has been mainly affected by the downturn in China's economy, stock market turbulence and the sharp decline in consumer spending in the Hong Kong and Macao region, once a luxury tourist destination for mainland tourists.

In fact, differentiated pricing is also an important reason for the low performance of the Chinese market. Jean-Jacques Guiony, chief financial officer of LVMH group, said at a conference call: "taking into account the regional price differentials, the shopping destinations of Chinese consumers are gradually shifting from Greater China to elsewhere. Japan and Europe are the most benefited."

Multiple damages to discriminatory pricing

When it comes to the high price of luxury goods in the mainland of China, most people will think of tariffs. In fact, the high price of luxury goods in the mainland of China is caused by multiple rules.

Reporters learned that, in accordance with the current import tariff, imported cosmetics, Leather clothing And accessories, bags and footwear need to pay 10% customs duties, 17% value-added tax, some high-end consumer goods also need to pay 10%-40% consumption tax. However, excluding these taxes and fees, the pricing of the same LV product in the mainland of China is still far higher than that in the European and American markets.

Insiders pointed out that LV, as an international luxury luxury brand, has monopoly and pricing power in the market. For mainland China's luxury primary market, LV may consciously raise its price in order to obtain high profits. At the same time, LV has many different levels of agents in China. These agents often lack the bargaining power. Even if taxes and fees fall by LV, they may still maintain a high price strategy.

In addition, the continued appreciation of the renminbi in recent years and the rise in operating costs such as rent and manpower are also the cause of high prices.

One industry researcher who has been engaged in luxury research for many years told reporters that the rapid development of e-commerce and overseas tourism is making the price of luxury goods transparent. More and more Chinese consumers are buying and purchasing LV products overseas, and middlemen get huge profits from them. This leads to confusion in channel and retailer, price out of control and counterfeit goods. Although the sluggish market in China can be offset by the growth of overseas markets, in the long run, with the increase in rental and labor costs of LV stores in mainland China, the profit margins will decline, and the situation will become even more severe, resulting in a vicious circle. The ultimate damage will be the brand itself. In addition to revenue, the most important thing for sustainable development of luxury goods is to maintain a high premium.

It is worth mentioning that in the first half of 2015, China led Asia Pacific market (excluding Japan) accounted for 29% of LVMH group's global sales, which is self-evident.

Implicit price cuts?

This year, tradition Retail industry The luxury industry has not been spared.

Chanel, the French luxury giant, is the first to launch a price adjustment strategy in the world. In April 8th, Chanel formally coordinated the price gap in different markets around the world. The first price adjustment was classic 11.12 and 2.55 and Le Boy Chanel handbag series. The head of Chanel China said that the price of Chanel in Europe was raised by 20%, and that in the mainland of China was reduced by 20%, so that the price difference in the global market would be narrowed. The adjusted price difference would not exceed 5%. Many analysts believe that as a big brother in the luxury industry, Chanel's price cuts in Asian markets have triggered a chain reaction. Major luxury brands will follow suit to adjust the global price system.

Although Jean-Jacques Guiony had previously said that the LVMH group had no plans to adjust the price structure, in fact, in order to balance the price difference, LV raised its average price by 5% in the two quarter after raising the price of European handbags by about 3% in the first quarter.

Former L'OREAL China and MontBlanc China executive Lu Xiaoming has publicly stated that for all luxury brands, narrowing the price gap between home and abroad must be the general trend. But the price gap should not be narrowed by raising the price of the European market, because the original price difference is unreasonable, and the price of luxury goods in the mainland market is overestimated.

An insider told the Beijing Commercial Daily reporter that narrowing the spread has become an inevitable trend in the development of the luxury market, but the price reduction has always been. Luxury goods The brand is seen as a "down payment" behavior, so some luxury goods are recessive. Luxury goods usually have a fixed price increase of one or two times a year. At present, Chanel is the only one with a high price. Other brands adopt a strategy of secretly adjusting prices. "For example, the annual price rise from abroad is the two price increase, and the Chinese market does not rise in price, which gradually leads to a low price. That's what Dior did.

According to the industry, LVMH group is likely to adopt a similar implicit price adjustment method with Dior in the future to achieve price reduction in mainland China.