Lowering prices, a choice luxury brands have to make

A shopper carries a Chanel bag along New York's fifth Avenue, Nov 24, 2014.[Photo/Agencies]

The European luxury brand Chanel recently announced that it was reducing the prices of three handbags in China by 20 percent while increasing them in Europe by 20 percent; some of its branches in Beijing have already made the adjustment. This is the first time Chanel has cut its prices in the past five years. Comments:

Even after the adjustment, the handbags in China are still five percent higher than the same products in Europe. How have Chanel shops in China survived in the past and why have so many Chinese been willing to pay the high prices for luxury goods? The answer lies in corruption. When the majority of buyers purchased luxuries as gifts for officials, they would expect the prices to be higher. Worse, most of the buyers were government officials who used taxpayers' money for bribes and so they didn't care about the higher prices.

Beijing Youth Daily, March 20

It is common practice for luxury brands to set prices higher in less developed countries, in order to make them more attractive to the rich people there. This strategy was a success in China, but it is failing because increasingly more Chinese travel overseas and purchase luxury goods overseas. Chanel's move means it is paying more attention to the market in China.

Beijing News, March 20

Some luxury brands set very high prices for developing countries under the excuse of high import tariffs; however, the true reason lies in their over-estimating of China's market. When wealthy Chinese rush overseas to purchase luxury items instead of buying them in a shop in China, especially when the euro has depreciated against the yuan, Chanel and its peers have no other choice but to lower their prices in China.

National Business Daily, March 20