How high are China’s luxury price premiums?
Part of our series with L2on 13 May, 2016
Prices for luxury goods vary across countries, a topic receiving renewed attention as the internet has provided consumers with complete transparency. Chanel, for example, announced last year plans to raise prices in Europe and lower them in China to close the gap between the two. Cartier, Burberry, Patek Philippe, and Louis Vuitton, also reduced prices in China in the spring of 2015. But how different are prices across countries? A lot. L2’s latest study on Luxury in China finds that Chinese customers pay 37% more than global consumers for Burberry and 25% more for Louis Vuitton. Furthermore, those brands are not the exception. Twenty-three percent of pure luxury brands (vs. accessible luxury brands) in L2’s Index add a 16% to 25% premium to items sold in China.
Accessible luxury brands are even more resistant to lowering prices (11% charge premiums of 36% to 35% of goods sold in China) as they have used it to boost low margins in the U.S. and the E.U. Several (e.g. Calvin Klein) have positioned themselves as pure luxury brands in China and price accordingly. For example, Calvin Klein products sold on the brand’s DTC site, Tmall, and JD stores cost twice as much as in the U.S.