Luxury Brands Price Cutting to Appeal to Chinese Consumers

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The wealthy Chinese shoppers of China are no longer dishing out the big bucks from some luxury products, according to the recent findings by many luxury brands, resulting in brands price cutting. According to Zhou Ting, the Fortune Character Institute director:

“In China, we believe price cuts by luxury brands will become the norm.”

So why are wealthy consumers not buying in China? A study by the US based company Bain & Company found many of these luxury buyers were shopping abroad, as the exchange rate for the yuan was more in their favor, and the product was cheaper. Why pay more for the same product in China when it can easily be purchased from another country for a lower price?

The evidence of brands price cutting is already being seen, as earlier in April, the luxury brand Chanel lowered their prices in China by 20%. Other luxury brands that followed suite were:

  • Patek Phillippe and TAG Heuer by as much as 40% decrease in the China market
  • Prada is rumored to be following this trend soon

70% of luxury shopping by Chinese consumers occurred overseas last year

Due to this statistic presented by Bain & Company, there were several brands who quit expanding into the China market, and others that shut down their current operations in the market. For example, Hugo Boss closed seven shops, while Burberry closed four outlets.

The problem with lowering the price on these luxury brands is brought to light by Zhou:

“…it could bring the risk of devaluing the brand to become more common fashion in consumers’ minds.”

This is a risk that many brands are taking, as they are seeing price falls in the country. And it is also a path that the government is praising brands who are pricing cutting, and even encouraging these companies to do this.

About Author

Social Brand Watch (SBW) is a collection of experts in digital, mobile and social media in China. SBW was created to complement Resonance's China Social Branding Report, a bi-weekly report focusing on modern marketing methods of the world's top brands in China.

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