Luxury goods makers have long valued Chinese consumers not just because of their huge appetite for Gucci bags and Cartier watches, but also for their willingness to pay more than their Western counterparts.
So it wasn’t business as usual in July when a pair of light brown Salvatore Ferragamo Carla leather pumps was being sold at 40 percent off, for 3,120 yuan ($507) on a site run by e-retailer Xiu.com, which is less than the item’s European retail price.
Likewise, at a downtown Shanghai outlet of Kering’s Gucci, a light pink Soho leather shoulder bag was discounted 30 percent to slightly more than 12,000 yuan, about the same price as a similar bag in the U.S., Bloomberg Businessweek reports in its Sept. 1 issue.
Several forces are fueling the price slides. Sales in China of goods from Europe’s most prestigious fashion houses have been damped by the government’s anti-graft campaign, which has curbed gift-giving. And steep import and consumption taxes on luxury goods bought in China have led an increasing number of wealthy locals to shop more while overseas.
Left with stacks of unsold merchandise in their mainland stores, high-end brands are resorting to something they rarely had to do earlier: price-cutting.
Consultancy Bain estimates that Chinese purchased a third of all luxury goods sold globally in 2013, but growth in luxury spending in mainland China will slow to 2 percent this year after rising 30 percent in 2011, it forecasts. Christian Dior and Ermenegildo Zegna Group both held sales at their China stores in July, with Milan-based Zegna cutting as much as 40 percent off menswear, leather items, and shoes.
Some discounting is more understated, as luxury houses try to avoid lowering the value of their brands along with their prices. Hermes dangled price cuts of as much as half off on dresses and shoes in April at an invitation-only sale, held in the eastern city of Hangzhou, according to reports by Chinese media. Guests were invited by mail to the four-hour sale, at a hotel in the city’s West Lake district, and barred from taking pictures, according to a story posted on the website of the People’s Daily, the official newspaper of China’s Communist Party.
Read more at Bloomberg.