Is The Electricity Business Law About To Finish The Good Days Of Cracking Down On Purchasing Luxury Brands?

The era of "purchasing one hundred thousand of the month" will soon come to an end in early next year.

Since the first e-commerce law of the People's Republic of China was announced in August 31st, it will be formally implemented in January 1, 2019.

Subsequently, a "T2 Shanghai Pudong Airport flights found more than 100 purchase" article brushing the circle of friends, let the public opinion ferment again.

The new regulation not only stipulates that natural persons, individual purchasing agents and micro businesses who use WeChat's circle of friends and other businesses to engage in goods and services are classified as e-commerce operators. They must handle industrial and commercial registration in accordance with the law, obtain relevant administrative licenses, and pay taxes according to law. They also make clear that individuals engage in small pactions. Although there is no need for registration of market participants, some more than 5000 yuan also need to declare tax in accordance with the law, otherwise they will be fined 2 to 500 thousand yuan.

In addition, a total of more than 8000 RMB yuan should be declared for non duty-free goods and port entry duty free shops.

This means not only purchasing, but also paying taxes for ordinary tourists to buy or bring gifts to relatives and friends in the future. Even if goods purchased at duty free shops exceed the limit, they still need to pay taxes according to law.

As a matter of fact, since the beginning of 2017, the Customs at Shanghai Pudong Airport has started to spot check the baggage of incoming passengers, and to pay too much luxuries or the same cosmetics requires paying taxes.

Make preparations.

Some analysts believe that China's electricity supplier industry has flourished in the past twenty years, but the following are the chaos of the industry, counterfeit goods, personal information leakage, tax evasion and tax problems.

The purpose of the "electricity business law" is to regulate the lack of supervision.

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According to the data released by the electronic commerce research center, the scale of cross-border import e-commerce pactions in China increased 19.4% to 1 trillion and 30 billion yuan in the first half of 2018, and is expected to reach 1 trillion and 900 billion yuan in 2018.

On these trading platforms, many sellers are individuals or small buyers.

Luxury goods and cosmetics are the main categories of purchasing agents. Because of the long-term differences between the prices and styles of the mainland and overseas, many Chinese consumers are accustomed to seek overseas purchasing, while those who purchase them earn profits from the price difference. In order to save costs, they usually avoid customs duties through various channels, and the most common way to avoid tax is using their own products without declaration.

With the rising purchasing power of Chinese consumers and the strong interest in luxury goods, luxury purchasing industry is growing.

According to a report by Bain company, in 2014 alone, the scale of luxury goods purchasing industry was between 550 billion and 750 billion yuan, almost half of the sales of luxury brand stores in the mainland.

This huge gray market makes the country lose a huge amount of tax revenue every year.

In the long run, cracking down on purchasing agents is good news for brands.

The reduction of purchasing is beneficial to increasing the direct contact between the brand and the consumers, and enhancing the emotional connection between the brand and the customers to cultivate loyal customers.

In addition, executives of luxury brands complain that many buyers often sell genuine goods and fake products in order to get high profits, which makes the quality of the fake products indirectly damage the image of the brand.

Jean-Jacques Guiony, chief financial officer of LVMH group, has previously commented that they do not encourage purchasing behavior and limit it as far as possible.

Chanel stores in London and Paris will also restrict purchases of hot items, such as the maximum purchase of two bags per customer.

In recent years, many overseas Chinese and overseas students began to take it as a business and expand their scale on behalf of the bonus. Their purchasing power often affects the normal stock turnover of the brand. Many brands have introduced various restriction policies, including FANCL, Shiseido, and Kose's Albion high-end Japanese beauty brands. They often issue restriction orders to curb rampant purchasing.

However, with the rise of the purchasing industry and the rise of large cross border e-commerce platforms such as koala shopping center, NetEase, the profit margins of the purchasing market are also increasingly narrow.

Tmall Luxury Pavilion, Jingdong Toplife and temple library and other domestic luxury platforms are constantly optimizing the purchase experience, providing a more convenient channel for Chinese consumers to purchase luxury goods online.

As these online channels are flagship stores directly opened by luxury brands, the supply of goods is guaranteed.

Last year, Jingdong invested in Farfetch, a British electricity supplier. Last Friday, the group has just reached strategic cooperation with Alibaba, and its Yoox Net-a-porter, the world's largest e-commerce platform, has entered Tmall luxury platform Luxury Pavilion.

The endorsement of brand resources abroad has also enhanced consumer trust in the domestic e-commerce platform.

Therefore, the strangulation of these "regular forces" has made the purchase business which has already been questioned by authenticity worse.

In addition, tariff reduction has narrowed the price gap at home and abroad and is bringing Chinese consumers back to China.

Chanel used to cut prices in the Chinese market in 2015.

At that time, Chanel became the first luxury brand to adopt price reduction measures due to China's foreign exchange and tariff gap.

Rising prices in overseas markets, however, cut 20% in the Chinese market. Adopting the global market parity strategy has made a sweep across China.

The wave of price cuts has begun.

At that time, China's luxury market has not yet come out of the cold winter. This move is intended to narrow the price gap between the Chinese market and other regions, boost sales in China, and crack down on purchasing agents.

Data show that although Chinese consumers contribute 1/3 of the global luxury goods sales, the actual pactions in mainland China account for only 1/5. The rest of the pactions occur overseas, including orders from overseas websites, Chinese travel shopping or overseas purchases.

In parallel markets, purchasing has strongly squeezed the performance of luxury brand domestic entities. By raising prices abroad, Chanel has become one of the lowest priced luxury brands.

Chanel fashion President Bruno Pavlovsky said in an interview with Reuters that the brand has succeeded in curbing the sales volume of the grey purchasing market.

According to the fashion business express data, the overall average price difference between luxury and domestic goods in 2017 decreased from 68% in 2011 to 16%, and the price advantage of purchasing will no longer exist.

Under such circumstances, the "profiteering era" of small buyers will come to an end.

However,

To completely get rid of the phenomenon of purchasing, there will be some resistance.

For Chinese consumers who are still price sensitive, as long as their consumption needs for luxury goods exist, purchasing will still exist for a period of time.

In addition, from the perspective of consumer psychology, many consumers are looking for purchasing agents not only because of price advantage, but also because they think luxury goods purchased abroad are "better".

In recent years, some of the luxury store clerks have changed their princes to sell the genuine goods to the consumers, so that some consumers begin to doubt the authenticity of the Chinese flagship stores.

Coupled with the impression that domestic luxury salesmen are highly cold and poor in service experience, Chinese consumers are more willing to buy acquaintances.

It is worth noting that in addition to a second tier city, most cities in China still have no major luxury brand stores, nor have online shopping channels been opened. If there are no more travel opportunities, people living in these cities still have to use purchasing agents.

Although all kinds of brands are trying to change strategy to online expansion in recent years, it is still necessary for consumers who are dependent on purchasing agents to change their consumption habits.

It is noteworthy that Chanel announced third price rises last week.

However, every time the Chanel announces the price increase, it will continue to promote the promotion of buying on behalf of the buyers. This is contrary to the intention of Chanel to crack down on the gray market, and it also leads the relationship between luxury brands and purchasing agents to enter a delicate stage.

At the beginning of this month, when the news of buying and buying was severely damaged in China,

The stock price of Gucci and other parent companies fell sharply and the market value evaporated 20 billion yuan on the same day.

The news intensified the tension among the giants.

There is still great potential for growth, but the complex retail environment and the US punitive tariffs or the luxury purchasing power of Chinese consumers are slowing down again. Analysts are reassessing the luxury sector and think the industry is in danger.

Some analysts say that luxury brands are not worried about the economic slowdown. Taking into account the expansion of the middle class, the level of personal spending is not bad. They are worried about purchasing agents, because buying and selling disrupts the supply and pricing mechanism of luxury brands. But how to adjust the price difference smoothly is not an easy task, especially in the Chinese market where luxury brands are increasingly dependent.

In the short term, purchasing may be right.

It brings pains, but the luxury attributes of these brands can be better protected.