Chanel Alters Pricing Around the World with Market Uncertainties
When sales of luxury goods in China slow down, big-name designers take drastic action to redress the balance and recover lost revenues. While some predict gloom and doom for the luxury consumer goods such as watches, jewellery and handbags, others are seeing the slump in the market as little more than a road bump that can easily be weathered through a little tweaking of prices in different global regions. With the recent crackdown by the Chinese government on luxury-gift giving, and a general slowing of the Chinese economy, watch manufacturers in particular were hit heavily. One luxury French brand, for instance, reported falling watch sales of 11% due largely to the sluggish Chinese market, and Prada agreed that more tough times were on the way for luxury brands.
Price Tweaks Combat Currency Fluctuations
Not all have agreed with this prediction, however. Hermes, makers of high-end silk scarves and Birkin bags, has continued with their planned expansion because they believe the slowdown in the Chinese market will be relatively short-lived. There has always been something of price gap across global regions. Currency fluctuations and exchange rates play a part, as does the perceived market value and the economy in any give area. Luxury brands such as Chanel and Tag Heuer adjust prices according to currency performance, and it’s this practice that saw Chanel recently raising prices for the European market while lowering them in Asia. The company claims this levels the playing field between global regions, harmonising prices across the market. Similarly, Tag Heuer took note of the rising value of the Swiss franc, lowering prices in the USA, UK and South America while keeping them flat within the Eurozone. The strategy is intended to fight parallel resale markets which tend to jeopardise the image and exclusivity of luxury brands.
Major Brands Continue Chinese Expansion Plans
Not everyone is convinced the raising and dropping of prices is an effective strategy. The focus in luxury shopping has changed from high-end goods to more experienced-based purchases such as travel, cars and hotels. Despite this, many more luxury brands are planning to continue their expansion into the Chinese market, including Gap, Kors, Estee Lauder and Tiffany. While some are predicting that currency and geopolitical issues, European Union difficulties and stringent rules in China will see the downward sales trend continue, the personal luxury goods market overall was still worth just under 300 billion euros in 2014, so it’s hardly surprising that many fashion and luxury brands see China as a worthwhile market still and do what they can to boost sales. The recent report sponsored by Citigroup, which predicts a doubling of the assets belonging to China’s wealthy population segment, is also good news for expanding luxury brands that wish to retain their market share and also increase profits in an otherwise challenging market.