Luxury Goods Giants Want To Increase Their Prices In Europe.

It includes LVMH Moet Hennessy Louis Vuitton SA, Prada (PRADA SpA), and so on.

The giants began to consider reducing the huge price gap between luxury goods in China and Europe.

A spokesman for Prada has made it clear that it may consider raising the selling price in Europe.

However, some Chinese industry experts said yesterday in an interview with a Morning Post reporter that such a move should be aimed at encouraging more luxury consumption to stay in China, but the possible risk is that the already weakened European market is exacerbated.

Profit margins under price differentials

There is a huge price gap between luxury goods in mainland China and overseas countries.

Because of the long-term tariff, the price of the same luxury goods abroad is generally 40% lower than that in the mainland.

Take Louis Weedon as an example, it is most representative.

One of the most popular handbags Speedy 30 in Beijing and Shanghai is priced at 6100 yuan (964 US dollars), while Europe sells for 500 euros (about 619 dollars).

Similarly, the retail price of Chanel (Chanel) handbag Timeless Classic Flap is 3100 euros (3839 US dollars) in France, while the same product has been sold to 37 thousand yuan (about 5850 US dollars) in the mainland of China.

This has led many Chinese to choose luxury goods overseas.

According to the Bain consultancy survey, about six of Chinese consumers' luxury consumption has become offshore (including Hong Kong and Macao) consumption.

According to statistics from overseas travel shopping service company Global Blue, Chinese people spend nearly 11 thousand euros on trips to Europe and Singapore.

Recently, the appreciation of the renminbi against the euro has exacerbated the spread mentioned above.

The euro has fallen nearly 16% against the yuan since last year.

"The price gap is getting bigger and bigger, which is very unreasonable. Enterprises need to react quickly."

Gallot (Christian Guyot), an analyst at Tradition Securities and Futures S.A., says.

For luxury giants investing heavily in China, China is one of the most important business growth points in the luxury industry, and luxury goods producers will not easily give up growth opportunities in China.

Europe's austerity measures and the uncertainty of the US mean that there is almost no other choice to achieve sales growth at present, but only in China.

But there are signs that sales of watches and designer handbags are slowing down in the Chinese market since the fourth quarter of last year.

Under such circumstances, luxury giants have to start weighing the gains and losses of every market.

Luxury giant is in a dilemma

It is reported that Lu Wei Ming Xuan group recently said that its domestic business in China has been affected due to a record high price gap at home and abroad.

Although Jean-Jacques Guiony, the group's chief financial officer, did not say that it would raise the price of its products in the European market, it stressed at the conference call with analysts that "we will take all measures that are most conducive to Jang Gio Johnny's profit."

Prada is much more direct.

A spokesman for Prada said, "if the euro continues to be weak, then in order to reduce the price gap with China, we may consider raising the price of products in Europe by up to 10%. Of course, we will not raise the price in the mainland of China."

Prada China Public Relations Officer yesterday refused to comment on the above news.

At present, Prada's revenue in China accounts for about 1/4 of its total revenue.

Zhou Ting, executive director of the luxury research center of University of International Business and Economics, analyzed yesterday that some luxury goods giant's European price raising actions should be aimed at promoting more luxury consumption to stay in China to gain more profits. However, this measure not only has some risks, but also makes the already weak European market worse, and the price adjustment may not achieve the goal of promoting consumption in China.

A consumer who often buys luxury goods says that the price difference between China and Europe is generally around 50%, so it will try to buy in Europe. Only when the price difference is reduced to around 10%, will it be cost-effective to buy at home.

Yu Yale (Aaron Fischer), a brokerage firm, CLSA Asia-Pacific Markets, claims that the price increase of luxury goods in Europe is unlikely to exceed 5% to 10%.

The dilemma of luxury goods giants is obvious at this point.

Cutting prices in China will squeeze profits and may destroy brand reputation. In Europe, if prices go up too much, they may hurt the desire of local consumers in the eurozone crisis.

In fact, some luxury brands have begun to adopt more and more discounts in China.

For example, consumers can buy 50 percent off goods at Ferragamo stores in China this year.

"In the past, it was 30 percent off at most, but this year they will voluntarily inform the customers that there are 50 percent off or even less goods."

Zhou Ting said Gucci (Gucci) discount is more common.

According to Zhou Ting, this year's domestic duty free shops and

(Outlets) the sales volume of the shop has seen a certain increase.