Why Luxury Goods Are More Expensive In China?

Eleven in the golden week, my wife is going abroad.

Although the author of the public affairs is itchy, he can only pretend that he has gone to a distant field in the circle of friends.

But it's not easy to get out of the country at the end of the year.

No, many relatives and friends entrusted their wives to buy large brand bags and famous brand cosmetics.

No reason for it. Who let them?

It's more expensive in China.

Why luxury goods are more expensive in China?

The analysis of luxury prices in various countries in the world released by DDT consulting in 2016 shows that China is the highest price country in the world with luxury goods. 23% of the luxury brands in China are priced at 16%-25% higher than in foreign countries.

Apart from the huge price difference between high-end luxury goods and domestic and foreign markets, the luxury brands show an amazing price difference, for example.

The difference between China and the US has reached 40%.

The theory of economics tells us: in a market, the homogeneity (not only refers to the physical meaning of the homogeneity, but also implies that the consumer's subjective cognition is indifferent) goods can only be sold at the same price.

The reason is simple.

If the seller can sell at two different prices, consumers who buy the goods at a low price will sell the goods to another customer at a price between their own purchase price and the seller's high selling price, so that the high price set by the seller can not reach a real paction.

Such a simple economic theory, of course, has its precondition.

The most important thing is that consumers can pfer goods or services to one another.

At this point, even for different consumers who are willing to pay, he can only adopt a single pricing mode.

However, once a company finds a way to separate different types of consumers, it will be motivated by profit making to adopt differentiated pricing strategies for consumers with different willingness to pay in the market segmentation.

Take the book market as an example.

A writer's book has a large number of loyal fans, who can make hardcover books first and sell them to loyal fans at a high price. After digesting these people, they will sell the paperback books to the general readers.

In this process, there is not only the price difference caused by the difference of production cost, but also the price difference that different people are willing to pay.

Economists have adopted an academic name for this discriminatory pricing model, which is called "three level price discrimination".

Management scholars prefer to call it differential pricing. The popular saying is that they treat differently.

According to the world clothing and shoe net, the geographical distance between China and the European and American countries and the obstacles of population movement actually provide a natural barrier for the sales market in multinational enterprises in China, Europe and the United States, so that these two sales markets can be separated, and it is difficult for buyers to pfer consumer goods between the two markets.

In this way, enterprises can naturally adopt different pricing strategies in different markets for different purchasing intention groups.

Who are pushing up the price of luxury goods?

Readers may have such doubts: in terms of average income, our country's per capita GDP in 2016 ranked only seventy-second in the world, far below the living standard of western countries, and the price of these high-end luxury brands should be lower in the Chinese market. Why is the reality actually the opposite?

Because of its brand awareness and reputation, the high-end consumer brands have relatively few similar substitutes and have a certain monopoly power in the market. According to the economic language, the price elasticity of demand is relatively low.

In order to maintain the brand's high end, enterprises have no incentive to increase their output to some extent. They even intend to lower the supply. Through the "hunger marketing" mode, buyers can not only get the pleasure of consuming the product itself, but also have certain identities, so that buyers can experience a sense of satisfaction that they own but others do not bring.

For the time being, China's per capita income is not very high, but its population base is large and its income distribution is uneven.

In January 20, 2017, China's National Bureau of Statistics announced the latest Gini coefficient of 0.465, which indicated that the domestic income gap was large.

From the Gini coefficient, China and Brazil, Mexico and other countries are in a tier.

Although the total proportion of the affluent group is not very high, the total volume is not small. This group of people has formed a great demand for high-end consumer brands, and it is difficult to find other similar alternatives, resulting in their willingness to pay premium for high-end consumer brands.

Against this background, brand enterprises face a steeper demand curve in the Chinese market, so they will take the high-end pricing route in pricing, and even some European and American low-end brand manufacturers are also creating the impression of high-end brands in China.

For example, the price of Starbucks, which caused the discussion in 2013, was determined by the characteristics of the Chinese consumer market. Who made you think that Starbucks's coffee is more petty bourgeoisie than other coffee and other drinks, which can better reflect the taste of consumers? A large number of consumers are willing to pay higher prices for Starbucks brand. Starbuck Corp, which is pursuing profit, will naturally respond to the domestic market and set a relatively high price.

Electricity business offshore outsourcing service is having a positive effect.

It is emphasized that only when it is difficult for buyers to pfer consumer goods between the two markets, can enterprises adopt different pricing strategies for different consumers and set higher prices for consumers with high willingness to pay.

Once the division between the two big markets is broken, the strategy that companies want to differentiate prices in the two markets will no longer work, because if consumers can arbitrage between the two markets and sell them to other consumers after obtaining cheap goods, the price discrimination strategy of the enterprises will not succeed, and eventually return to the single pricing mode.

In other words, when there is a significant difference between the two countries' market prices, smart consumers and entrepreneurs will naturally find and use this spatial imbalance to achieve cross regional arbitrage.

In recent years, on the one hand is the rise of tourism shopping abroad, while the major business platforms, such as Tmall, Suning, Amazon, vip.com, have launched offshore outsourcing services.

With the maturity of these overseas purchasing platforms and the increasing rationality of domestic consumers' brand consumption, the two countries will tend to a new equilibrium and reduce the price gap between the two countries to a certain extent.

More interesting reports, please pay attention to the world clothing shoes and hats net.