Daily Insights

China’s Luxury Price Gap Fuels Travel Spending

By: Liz Flora | Aug 28, 2019

For China’s luxury shoppers, boutiques in Paris remain a bargain compared to Beijing or Shanghai.

Gartner L2’s China: The Traveling Chinese Consumer Insight report finds that pure luxury fashion brands are an average of 33% more expensive on their mainland China sites than their France ones in 2019, a gap keeping Chinese demand for internationally sold products high. 

Previously 36% in 2018, the price difference has decreased slightly over the past year after luxury brands have pursued greater international price parity. As China reduced its value-added tax (VAT) for imports in April 2019, brands announcing China price drops included Louis Vuitton, Gucci, Hermès, Piaget, Montblanc, Prada and Miu Miu.

But the report finds that complete price parity remains rare, as more than half of pure luxury fashion brands still have goods that are between 31%-55% more expensive in mainland China than in France. Only 27% of Chinese consumers’ luxury shopping is done within mainland China. 

In the United States, the price gap for pure luxury fashion labels with mainland China has narrowed from an average of 21% in 2018 to 12% in 2019. The average China-US price gap for accessible luxury brands, a category which includes more American labels, is much wider at 46%, but has also decreased since 2018. Brands have noted that Chinese tourist spending in the United States has been in decline in the midst of the trade war, currency fluctuations, and greater visa restrictions, while Kering’s CFO stated that Chinese traveler spending in western Europe remains “solid.”

In addition to the VAT reduction, the Chinese government has taken other measures to increase domestic spending, including a crackdown on daigou sellers bringing in goods purchased outside mainland China and relaxations on duty-free shopping limits. One prediction states that these measures will make the proportion of goods bought outside vs. inside mainland China divided 50-50 by 2025. But Chinese consumers’ total share of global luxury purchases is also estimated to rise to 41% in that same time period, meaning that Chinese travelers’ international luxury spending will continue to be a significant force shaping the industry for the foreseeable future.