The fluctuations with European currency, has had a dramatic effects on sales within China for those brands that are considered global luxury brands. Due to the euro becoming weaker, products in China from many brands is 70% higher than in other areas of the world. However, brands are trying to work around this issue.
Thierry Stern, President of Patek Phillippe when writing about these price differences according to various markets stated:
“This would not be fair to our local clients….such difference would fuel the gray market.”
Chanel announced that it would be cutting prices of their products in the Chinese market, while increasing the price of products in Europe in order to make up for the price difference.
Tag Heuer announced that they would be dropping prices by 8% in China, the US and other locations. While dropping the price in Hong Kong by 13%.
These price differences are being referred to as the gray market. And one of the reasons why there is such a big price difference being seen is due to illegal trading to avoid the tariffs on goods sold abroad. This gray market is hurting every brand within the Chinese consumer market, as well as other global consumer markets.
This is one reason why Tmall is becoming the go to location for brands who want to ensure that they are not suffering from the gray market effect.
Tmall works to eradicate those brands that do not have official flagship stores.
The offering of flagship stores led to Burberry, L’Occitane and Estee Lauder to join Tmall. With the ability to open a flagship store, consumers can trust this brand even more, and trust is very important in the Chinese consumer market. It helps to develop loyal customers and ensure that impostors are not taking business from the real brand.