How Does The Luxury Brand Adjust Its Pricing Strategy When China'S Electricity Business Law Is Formally Implemented?

In January 1st, the Chinese government formally implemented the new electricity business law to protect the legitimate rights and interests of all the subjects of e-commerce, regulate and maintain market order, and promote the sustained and healthy development of e-commerce.

The new regulation stipulates that all operators of e-commerce activities (except personal convenience labor activities and small pactions) should register with the market participants, fulfill their tax obligations according to law, and enjoy tax preferences.

This will cause a very serious blow to the purchasing industry that evade taxation and earn commodity price differentials.

Brand differential pricing policy and high tariffs promote the purchasing industry

New York Digital Marketing Research Institute Gartner L2 has released a Market Research Report "Luxury China:Gray Market (Chinese luxury market)".

They believe that China's high tariffs on imported products and unreasonable pricing of luxury brands have spawned the vigorous development of the purchasing industry.

Gartner L2 statistics show that in 2017, the price of luxury brand China's official website was 11% higher than that of the US official website.

As time goes on, the gap between commodity prices is also growing.

In 2018, the average price difference of luxury brands in China and the US market reached 21%.

The average price difference of luxury goods between Chinese market and French market is even more striking, reaching 36%.

Although purchasing agents will charge consumers a certain additional cost, the total price of goods will still be lower than that of luxury brands. The spread is the biggest reason why consumers are welcome to buy and sell third party channels.

Strike hard purchasing behavior

The new regulations promulgated expressly expressed the Chinese government's determination to crack down on illegal purchasing of grey market, but also reflected the Chinese government's support for small and micro enterprises engaging in Transnational E-commerce.

The regulations clearly state that the state will enhance the facilitation level of cross border e-commerce and promote the establishment of cross border e-commerce exchanges and cooperation with different countries and regions.

In addition, the regulations also made strict checks on the selling situation of Taobao, WeChat and other electronic business platforms, which also had some impact on the purchasing industry.

But there are policies and countermeasures.

In order to avoid the keyword checking function of the platform, many purchasing goods are sold in WeChat friends circle through code and secret language, and the voice communication with buyers further reduces the probability of being discovered.

Before the promulgation of this regulation, the Chinese government also made great efforts to crack down on purchasing behavior and protect the domestic market environment.

During the National Day golden week of 2018, the Chinese customs increased the inspection of overseas shopping for the purpose of cracking down on purchasing agents, and fined tourists who carried goods beyond the duty-free quota.

The rise of the new middle class has made the Chinese market a global concern and has become a battleground for luxury brands.

Because the price gap is too large, the main luxury purchases of Chinese consumers occur overseas.

Customs in order to crack down on purchasing agents' overseas shopping and thorough investigation of the returned luggage directly affect the income of the major luxury brands, causing the stock market turbulence.

Luxury brands need to take the initiative to solve problems.

Gartner L2 said that in order to protect consumers' rights and interests and crack down on the gray market and stimulate consumer spending in China, the Chinese government lowered import tariffs on clothing, cosmetics, household goods and jewelry in July 2018.

They put forward the following three points:

Rationalization of commodity prices: encouraging Chinese consumers to buy goods through official channels by adjusting prices instead of reducing costs.

Active monitoring: monitoring the sales of goods on the online channels, determining the number of unauthorized dealers and fakes, and taking corrective actions when necessary.

Official certification: expanding official influence through the use of tools and media

Gartner L2 believes that despite the many ways of purchasing checks, if the Chinese government can completely stifle purchasing behavior, the future of luxury brands in the Chinese market will depend entirely on their pricing policy.

If we do not take this seriously, the great price difference means that the purchase is still profitable, and the third party seller will still have a profound impact on the online sales and brand image of the brand.

Author: white feather plus