Deciphering The Price Strategy Of Luxury Goods Industry

"I don't think everyone will adopt that drastic price cut."

Aaron reluctantly said, "the price will directly affect the profit rate. Apart from taxes and fees, luxury brands will also raise their rents in the domestic real businesses. The entire labor cost is basically the same as that in Europe, so luxury brands will reduce their prices, either at the expense of their own profits or by the government's actions - tax cuts."

Indeed, in the face of serious consumption outflows, the Chinese government has taken concrete actions.

Since June 1st, the current measures have reduced tariffs of 14 categories, including clothing, shoes and cosmetics, including 50%, but most of them are high-end products.

This will undoubtedly remove some worries that luxury prices will sacrifice local profit margins for luxury brand executives.

Aaron and his fellow executives are waiting for further rules to decide the price adjustment trend.

Tariff concessions can finally bring about the price reduction of luxury goods? Aaron frankly, as one of the taxes and fees, tariffs only account for about 10% of the final retail price of luxury goods.

If the first step is to reduce tariffs by 50%, the price of the corresponding products in China will be reduced by about 5%-8%.

Just a few days after the announcement of the regulation, the cosmetics group headed by L'OREAL and Estee Lauder announced the price reduction strategy.

But I'm afraid the resulting price system will not change so quickly.

Some of the goods have been declared in autumn and winter, and they have not enjoyed tax concessions. If the price system is changed at this time, chaos will inevitably arise.

"It is estimated that the price of goods will be realized first in the spring and summer of 2016, if

The price adjustment will be around 10% if the total exemption is further reduced.

I have a clear feeling that it will be realized in June next year.

Aaron revealed.

Although such a price adjustment will narrow China and Europe

The price difference has little effect. If the euro had depreciated by 30% in the past, if European luxury goods were to be used,

At 100, the luxury market in mainland China now has an average price of 160-180.

But this is very important for balancing the significance and impact of luxury prices in the Asia Pacific region.

"Now Japan's price coefficient is about 120-130, South Korea 140-150, Hongkong 150-155.

If China's economy falls by 10%, the price of Japanese yen will soon rise, and the price difference between Asia and the Pacific will be controlled within 5%.

In the past, luxury brands have been interested in narrowing the price differences between Mainland China and Hongkong. In the past two years, they have gone wild to Japan and South Korea to rush to buy. First of all, readjusting the price system in the Asia Pacific region is the top priority for many luxury brand executives including Aaron.

After balancing the price and sales in the Asia Pacific market, the strategy of increasing the price of luxury goods in Europe by 5%-8% will not increase in China. Aaron predicts that two to three years later, luxury brands will basically achieve the goal of balancing the global price system.

The insider told me that Louis Vuitton will also start with such a price adjustment strategy.

"Whether it's a price cut or a discount, I don't think there is a necessary link between price and brand image, but now Chinese consumers are from original brand orientation to quality oriented, so luxury brands must show to Chinese consumers that you are worth the money, which is very important and also the biggest challenge."

Faced with repeated questioning, Clemence emphasized this.