Tariff Cuts Can Stimulate The Price Of First Tier Luxury Goods Can Attract Consumption Reflux?

In July 1st, China lowered the import tariffs on luxury goods, triggering Louis Vuitton, Gucci (Theme Reading), Herm luxury s and other international luxury giants to reduce the price of the Chinese market.

In July 14th, the British luxury brand (special reading) Burberry also confirmed that the price of some clothing and luggage products in China has been reduced by about 4%.

This tariff cut has caused the price of luxury goods in China to dive, and the difference between domestic and international prices has narrowed, which is obviously good for consumers. To a certain extent, it can make Chinese luxury consumers stay in domestic consumption.

However, insiders said that import tariffs accounted for a relatively low proportion of retail prices of imported commodities, with limited impact, resulting in large consumer reflux may be smaller.

In May 31st, the Customs Tariff Commission of the State Council said that a new round of import tariff reduction was formally implemented since July 1st, reducing the MFN rate of some imported consumer goods, involving 1449 tax items, covering consumer goods and clothing.

Among them, clothing, shoes and hats and sports fitness products and other import tariffs average tax rate will be reduced from 15.9% to 7.1%, skin care, hair and other cosmetics and some medical and health products import tariff average tax rate will be reduced from 8.4% to 2.9%.

In response to this policy, Louis Vuitton China's official website and its stores lowered the price of some products by about 200 to 2000 yuan, about 3%-5%.

According to the quotation from China's official website, the price of MONOGRAM medium shoulder bag decreased from 16 thousand and 400 yuan to 15 thousand and 700 yuan, which was 700 yuan. The NEONOE bucket package dropped from 12 thousand and 300 yuan to 11 thousand and 800 yuan, which was 500 yuan cheaper and a 4% decrease.

Louis Vuitton public relations staff in an interview with the twenty-first Century economic news reporter, said that as early as June 29th, Louis Vuitton has started the offline retail stores and online sales prices down simultaneously.

Because the product category is quite many, the price adjustment scope is not uniform.

Following the Louis Vuitton, in July 6th, the retail price of Gucci in all retail outlets in the mainland of China was also downgraded, including the new and classic ones, with an average decrease of about 5%.

Taking Gucci's Sylvie series medium pack as an example, the selling price dropped from 21 thousand and 400 yuan to 20 thousand and 200 yuan, which was reduced by 1200 yuan. The selling price of FENDI little monster shoulder bag dropped by about 1000 yuan.

In July 26th, Gucci official website customer service staff in an interview with the twenty-first Century economic report reporter also said that under the influence of this tariff adjustment, Gucci correspondingly reduced the price of some of the goods in sale. Consumers could see the latest price adjusted after browsing the official website, but did not find that the sales volume increased.

Chinese customers are the backbone of luxury consumption, but a large part of Chinese consumers choose to buy luxury goods abroad, mainly because of price differences.

The tariff cut has narrowed the spread, or will attract Chinese consumers to reflow from abroad to further boost domestic luxury sales.

According to the Ministry of commerce data, the total consumption expenditure of domestic consumers abroad is about $200 billion a year, indicating the demand for luxury goods in China is very strong.

Bain's latest research report, "China luxury market research 2017" shows that in 2017, China's luxury consumers accounted for 32% of the global market share, and the luxury consumption growth rate in the Chinese market has surpassed that of overseas.

The mainland market grew by 20%.

Despite contributing nearly 1/3 of the share of consumption, as of 2017, local consumption of luxury goods in mainland China accounted for only 8% of global consumption, indicating that buying luxury goods overseas is the mainstream consumer habit of Chinese consumers.

Chinese consumers with strong purchasing power have become the competing objects of the first tier luxury brands. The major brands hope to narrow the price difference between products in China and abroad in order to snatch the big cake in the Chinese market through the Global Balanced pricing strategy.

As early as March 2015, the French brand Chanel took the lead in balancing the price of the global market, announced a 20% reduction in the Chinese market, and adopted a price increase strategy in the European market to control the difference in price between 5% and basically realize the global parity.

In the same year, Gucci cut the price of its stores in China by half, in order to boost domestic demand and crack down on the booming grey purchasing market.

Later, with the rising voice of global price integration, the price of other luxury brands in China was also down. According to the report of the 2017 guest luxury global price index released by the guest Research Institute, the average price difference between Chinese luxury goods at home and abroad has dropped from 68% in 2011 to 16% in 2017.

In recent years, the Chinese government has also taken active measures, including strengthening control over the gray market, promoting cross-border electricity suppliers to replace purchasing agents, and lowering import tariffs. This has promoted the rebound of the luxury market in mainland China and accelerated the return of Chinese consumers.

An economist at HIS Global Insight has said that this series of measures is intended to re pfer overseas shopping to the mainland and cultivate the mainland's luxury consumer market, thereby driving the overall consumption economy to improve.

According to the bain Research Report, sales of luxury goods in China will increase by more than 20% this year.

Despite the decline in the average price difference between international luxury goods and Chinese luxury goods, there is a huge price difference in luxury goods purchased in China compared with foreign countries.

According to the Ministry of finance's sample survey, import tariffs generally account for 0.4% to 6.5% of the retail price of imported goods.

This is because tariffs are levied on the basis of the import price of the goods rather than the domestic market price. For the high-end consumer goods, the market price is usually several times the import price.

At present, there is an average 20%-30% price difference between the domestic and foreign luxury goods market, so the tariff reduction has little effect on the retail price of luxury goods.

According to industry sources, in addition to tariffs, the import value added tax and consumption tax included in the import price of luxury goods are the "highlights".

Although tariff reduction has limited impact on the retail price of brand terminals, it has released the signal to encourage and promote consumer reflow to the market, which will bring more favorable news to domestic consumers in the future.

In an interview with the economic news reporters in twenty-first Century, Zhou Ting, President of the Research Institute, said that although the impact of tariff decline on the cost of luxury brands is very small, what is more important is the significance of macroeconomic regulation and control, which has a positive psychological impact on the whole consumer market.

Apart from price factors, the relative leading edge of overseas stores is also the reason why many Chinese consumers go abroad to "cut their hands" in order to provide comfortable shopping experience, complete product style and perfect after-sales service.

China luxury Consultants

In an interview with Asia One, the price is just one of the many factors driving the purchase decision.

"Sales service, shopping experience, quality assurance and brand culture are all important reasons for Chinese consumers to buy luxury goods in the country of origin," he said.