Chinese Shoppers Will Get a Luxury Price Break Soon
The New South China Mall has been almost completely empty for most of its 6 year existence. Many luxury flagship stores report a similar lack of foot traffic.
Many Western companies are excited about China’s rapidly growing middle class, and the consumer opportunity they present, but for luxury brands (not including luxury automobile makers) the most profitable path to capturing Chinese consumer spending power has been to market to the mainland, and sell abroad.
Why? For mainland China, import duties typically make the same goods 50-70% more expensive than they would be in cities outside of China. In France alone, a survey by Global Refund estimated that Chinese shoppers were responsible for nearly $1 billion in purchases. {Reuters} Perhaps in response to those type of statistics, China is preparing to reduce or eliminate the high import duties that drive consumers outside of mainland China for shopping.
Luxury Society covered some of the ins and outs of Chinese retail strategy for luxury brands. Essentially, flagship stores in mainland China are little more than street advertising to entice consumers to shop abroad, and on occasion private showrooms for a few high net worth shoppers who can keep the stores profitable with one or two spending sprees each year. The sales? Those are happening in places like Hong Kong, Singapore, Paris, London and New York.
In spite of the high taxes, and the fact that a good amount of Chinese luxury shopping is done outside of China, the country recently overtook Japan as the world’s second largest luxury market. Restrictions on luxury advertising in Beijing demonstrate the opposing views of communist capitalism, but China’s goal to increase domestic consumption and reduce their dependence on exports seems to be gaining ground over state sanctioned ideals.
After all, even though the current economic boom can create jobs building malls and flagship stores, Â if doesn’t matter if none of that money makes its way back into the store.
