Chanel is lowering prices in China due to the falling value of the euro.
Earlier in the year, prices in China were as much as 70 percent higher than in Europe for soft luxury goods. In March, Chanel cut prices by up to 20 percent on many product lines with prices on other goods leveling off throughout the year.
Chanel said of the price discrepancies, “These differentials, which exist for all exporting brands, are caused by exchange rate fluctuations and the methodology used to set prices, which include taxes, import duty and transportation costs, and the economic environment, all of which are specific to each country.”
Fortune Character Institute found that Chinese accounted for 47 percent of all luxury purchases last year, but that 76 percent of those purchases were made outside of China, reports CCTV America.
“If their stores in China continue to have low sales, suddenly, they are nothing but an ad and showcase for these brands. It would unbalance their global sales system, and in emerging markets like China, profit margins are much higher than in Europe. So even though overall sales are on the rise, the profit rate is, in fact, going down,” said Fortune Character Group chairwoman Tina Zhou.
Zhou also noted that Chanel must also narrow the price differences on online platforms, which require unified pricing.
Prada, Dior, and other luxury companies have followed suit with similar price reductions in China.
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