Chinese consumers may once again buy luxury at home.
Since the European Central Bank announced in late January that it would launch a quantitative easing program to stimulate economic growth in the region, the euro’s exchange rate with the yuan hit its lowest ever rate, which meant big deals for Chinese travelers in Europe and expensive luxury products for buyers in China. With several prominent European brands lowering their prices in China, the Ministry of Commerce will look to expand and stabilize domestic consumption in China in 2015, according to ECNS.
“The Ministry of Commerce and other relevant departments will continue to adjust the market price for luxury goods to enable consumers within the Chinese mainland to buy luxury goods at a reasonable price without going abroad,” said Ministry of Commerce spokesman Shen Danyang.
Chanel has already lowered its prices in China, announcing cuts of nearly 20 percent on several product lines in March with other prices leveling off throughout the year, reported ECNS. Louis Vuitton has announced an 18 percent price drop in the country, and Versace is expected to announce price drops for May.
Fortune Character Institute, a research center based in Shanghai, recently reported that luxury purchases within China decreased by 11 percent to $25 billion last year. Despite the spending slowdown on the mainland, Chinese tourists made up for it with luxury purchases abroad.
Data from HSBC shows that Chinese consumers have made around two-thirds, or 66.6 percent, of their luxury purchases outside of mainland China in the past. During last year, however, consumers from the Mainland made 76 percent of their luxury purchases overseas, according to Fortune Character Institute.
Consultancy firm Bain & Company backs up these findings, noting that overseas spending by Chinese consumers is on the rise, with a 9 percent increase to $81 billion reported for 2014. Consumers traveling overseas accounted for 55 percent of Chinese luxury spending last year, and purchases through relatives, friends, and professional agents, called daigou, made up another 15 percent.
As prices for European luxury brands come down in China, we may see these overseas spending trends return quickly to past levels.
image credit: chris