Chinese Consumers pay a lot for foreign brands
Today China is an essential lever for foreign revenues, but for Chinese brands too. The Chinese clearly demonstrate their desire to westernize, whether through daily acts of consumption or more occasional (luxury sector). Despite much higher price in China, sales of western products explode. This trend can count on the proportion of “rich” Chinese which will double by 2020 (they will be about 280 million). These figures will allow China to provide 40% of the global luxury market, continually expanding. A boon for the luxury market in China!
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Chinese prices and foreign prices are different for foreign brands
Western products in China are seen as products of quality and trust. For daily products, we may notice significant price differences lie in part in the intrinsic quality of the product. However, we also observed significant differences between prices of Chinese products sold in China, and the same products sold abroad. They are invariably more expensive in China.
Why such a difference?
These significant differences have several explanations. We found three main reasons for these price increases: distribution fee, other general taxes and Western brands’ positioning.
Chinese distribution fees (18.4%) are almost twice higher than in Western countries (8.99%). These taxes generate a huge impact on the prices that the Chinese pay in the shop. High distribution fees are justified by the Chinese sales network which is still underdeveloped.
Distribution fees account for approximately 55% of total taxes, which means that other taxes applied to products are not to be neglected, or 45% of total taxes (logistics costs etc.).
The brand positioning
Finally, the Western brands positioning is also a decisive factor in the final price of products in China. Western brands which invested in the country before the Chinese local brands, such as Starbucks Coffee, can position themselves as industry leaders in the Chinese market. This justifies their higher price.
Chinese buy Western brands despite high prices
In spite of the price, Chinese do not hesitate to buy Western products. Acquire small pieces of the West is a value that ignores the actual price. When we love, we do not count! This is even more true for the Upper Chinese Class. These wealthy Chinese pay a high price to own theses powerful luxury products. Regardless of the price! They want to symbolize success, elegance and refinement, to be envied and seen, to show their professional success and level high life… It’s a way to be different. In China this is called “face”.
Few Chinese can afford luxury goods in china. Moreover, they represent a large enough minority to bring the sector at its peak. For them, it is a real pride to pay a lot because it proves that they can do it. They can take these prices even if they are above average prices (compared to Western prices). It is a way to show explicitly and without any retained the extent or their means.
Besides and in China, Western products are perceived as being higher quality. Discover more about luxury in China.
Comparison between prices of luxury goods: