In Response To The National Tax Cut Policy, The Price Of LV Also Dropped Synchronously.

Starting from April 1st this year, the value-added tax rate will be lowered in China, of which 16% of the original tax rate will be adjusted to 13%, and the corresponding cross border value-added tax will also decrease simultaneously. Since there is no intermediate link in cross border retail import, value-added tax is charged on the basis of retail price. Therefore, insiders analyze that luxury brands in China are setting off a new round of price cuts.

At present, Louis Vuitton is the first luxury brand that should respond to the policy.

Louis Vuitton has quietly lowered the price of China's official website products by about 3% a day ago, according to the fashion business news, citing the sources. The brand insiders confirmed to the fashion business express that the move was related to the value added tax reduction.

Another luxury brand MontBlanc Montblanc has also issued a formal announcement that it will respond positively to the call for value-added tax reduction. It plans to adjust the prices of its products, including writing tools, leather goods and high-end timepieces, starting from April 1st, and the price of specific products will be based on the actual price of shop and official website.

Swiss earthen jewellery and watch brand PIAGET earl, China, disclosed to WeChat public number LADYMAX that the retail price of related products in mainland China will be lowered from April 1st onwards.

This price adjustment has further reduced the price difference between Earl's works at home and abroad, enabling Chinese consumers not only to enjoy better services at home stores, but also to enjoy better prices.

Tmall international also announced today that it will fully adjust the cross border value-added tax. After April 1st, consumers will enjoy the benefits from tax reduction in every cross border order Tmall international has concluded. For example, the price of high-end perfume brand Creed will be reduced from 2690 yuan to 2639 yuan.

Wang Haoyang, general manager of public affairs of Tmall import and export division, said cross border retail import is the industry that allows consumers to enjoy the lower retail prices at the first time, which is a visible dividend for consumers.

According to the cross border New Deal formally implemented in January 1, 2019, the annual paction limit is 26000 yuan per person per year. After tax reduction, the maximum annual savings per person can be saved by 546 yuan.

It is worth noting that this is less than a year away from the wave of luxury price cuts after the tariff cut in July last year. Behind this is China's attempt to re pfer overseas shopping to the mainland, cultivate the mainland's luxury consumer market and drive the overall consumption economy to improve.

As early as 2017, the premium of European luxury goods in China has shrunk by 25%, which has become an important trend in promoting domestic luxury consumption, according to the financial times.

According to DDT's survey of the prices of nearly 2000 kinds of luxury goods, the price difference has declined.

The average selling price of luxury goods in China is 32% higher than that in France, and 41% higher in the year before.

In July 1st last year, China's import tariff reduction plan was formally implemented, covering consumer goods, clothing and so on.

Among them, the import and export tariff of clothing and shoes and shoes was reduced by 51%, and the import tariff of toiletries was also adjusted by about 48%. The tariff of watches and spectacles and jewellery decreased by 13.9% respectively.

Louis Vuitton responded to the policy for the first time. The official website began to cut the price of the whole line three days ago, and the price dropped from 200 to 2000 yuan. For example, the price of the MONOGRAM medium shoulder bag, which was originally priced at 16 thousand and 400, was adjusted to 15 thousand and 700 yuan.

What it means is that LVMH is accelerating the layout of the Chinese market.

Sun Chenghai, director of LVMH communications image director Antoine Arnault and China International Import Fair (CIIE) signed an agreement at the headquarters of LVMH on Monday. The group will formally participate in the from November 5th to 10th China International Import fair.

After Louis Vuitton, Gucci also decided to adjust the retail price of all retail outlets in mainland China, including the new and classic ones, with an average fall of 5%, aiming to attract more Chinese consumers to spend in the local area.

However, in the luxury industry, where price increases have become an inertia, price reduction has always been a very sensitive topic, because the brand image that has been carefully built has been ignored for a long time. However, the existence of the spread of price will cause business imbalance between the market and the market, and China has become the most pressing market for luxury brands since nearly two luxury brands have taken the initiative to respond to China's tariff reduction measures.

In a recent report, Bain, a consultancy, stressed that the four main driving forces of growth in China's luxury market are millennial consumers, local luxury consumption growth, digital strategy and fast-growing middle class groups.

With the adjustment of China's tax rate and the adjustment of the global price difference of luxury goods, the consumption of luxury goods in China and abroad will be flat in 2025, which means that the brand should focus on the development of the Chinese mainland market.

According to fashion headline statistics, in 2018, the "China market" became the key word mentioned in many major luxury fashion group's earnings reports, especially LVMH, Kai Yun group and Hermes, and the three giants also welcomed the best performance in 4 years.

Bernard Arnault, chairman and chief executive of LVMH, said that whether it was revenue or profit, the group set a new record in 2018, especially when Louis Vuitton sold more than 10 billion euros last year, which means that LVMH's brand creativity and quality are both attractive to consumers.

Jean-Jacques Guiony, chief financial officer, revealed that Chinese consumers continued to buy major brand products in the fourth quarter in China or overseas, and the related brand revenue grew to two digits.

Gucci, the core luxury brand of Kai Yun group, broke its 8 billion euro mark for the first time last year, further approaching its competitors Chanel and Louis Vuitton, while 62% of consumers were millennials, and 35% of them were Chinese consumers.

Influenced by the positive trend of Gucci performance, the market value of Kai Yun group exceeded the Hermes group at the beginning of this year, while the market value of Hermes was almost 1.5 times that of Kai Yun group 2 and a half years ago.

Despite the proposed launch of the US cosmetic business next year, the market value of Hermes rose to 61 billion 600 million euros, but still less than 62 billion 700 million euros of Kai Yun group.

What it means is that the financial downturn mentioned by Hermes is related to the high demand of Chinese consumers' handbags. In order to meet the needs of Chinese consumers, Hermes has added 3 leather workshops in the past two years, and increased its leather product capacity to 8% in 2017.

Despite the good market trend, luxury brands still can not relax their vigilance. Since the second half of last year, analysts have repeatedly sent out signals suggesting that the fashion industry or downside risks.

Some analysts believe that the characteristics of the luxury market are fast changing and closely related to the global economic situation. Any economic problems and geopolitical instability are the sword of Damour and Chris.

Analyst Benjamin Cavender has made it clear that 2019 may become a tough year for Western brands. Chinese consumers may not be willing to spend money on the latest smart phones or luxury handbags when they tighten their spending. This sudden change will create a blow to luxury brands, and fewer Chinese consumers are buying smart phones. The next consumer category may be luxury handbags and watches.

This may explain from the side that why there will be more luxury brands to respond to this reduction in order to stimulate consumers' demand and purchase.

In addition to Louis Vuitton, Montblanc and other luxury brands have been acting, however, Gucci today to the fashion headlines to respond to the temporary no price reduction of the action news.

Erwan Rambourg, head of HSBC consumer and retail research division, believes that under the premise of stable GDP, Chinese consumers' demand for luxury goods is more related to ideas than to GDP growth or tariff changes, in other words, the sensitivity of Chinese consumers to luxury goods prices is decreasing.

After all, price is only a basic part of luxury brands. To ensure the brand's strategic position in the market, luxury brands should focus on enhancing their value and creativity instead of controlling prices. The concept of luxury in the new generation of consumers in China is being redefined.

Author: Zhou Huining