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Luxury Products in China: Why Are They So Expensive?

Luxury products in China, and around the world, are an interesting phenomenon. They are basically unnecessary, yet we tend to hone in on them more than anything else in the free market.

There are some things we need, such as food, toilet paper, blankets, water and a roof over our heads, but we don’t need fancy cars and yachts, the highest-end computer, a diamond ring or the most popular clothing brands. However, when we go out shopping, the luxury goods  we don’t need can be more attractive than the things we need to survive. Think about it: when you go shopping, what is more exciting for you? A coat to keep you warm and snug during cold weather, or the latest release iPhone? Chances are you’d pretty much go for the phone. There’s no denying how cool and flashy phones can be, but there is also no denying you do not need them to survive.

The reason behind our longing for luxury products

luxury product in china

So, there is a crucial difference between our needs and wants, but why do we consistently want items and products we simply do not need? As humans, there is this feeling inside of us that we are rarely satisfied with what we already have, and that feeling leads us to want more and more things. The feeling is not a natural one; it is based on the way our world and society have grown more materialistic over the years. Because of the way our world is now shaped, we are told to always want more and to never be pleased with what we have in the moment. Our attempt to fill the hole of longing quickly becomes an incredibly expensive habit, and it can be extremely difficult to shake.

Top searched luxury products in China

When it comes to purchasing goods and spending power, China is one of the world’s leaders. Due to its strong economic power and growth, spending and purchasing in the Chinese market can greatly influence the profits of companies that produce luxury goods.

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So what are the top Chinese luxury brands?

In 2013, the most searched for luxury brands included Audi, BMW, Chanel, Estee Lauder, Lexus, Lamborghini, Gucci, Land Rover, Infiniti, Ferrari, Prada and Swarovski to name a few. You probably noticed straight away that the majority of these brands are car manufacturers. Cars are one of the most expensive luxury products you can buy, and given the purchasing power in China, it makes sense that people would be searching for information about these fancy and expensive brand names.

Although cars can be a necessity in terms of commuting between work and home, they can also become significant status symbols. Owning a Ferrari or Lamborghini can be a very striking demonstration of great wealth and success. While cars are extremely costly symbols, many Chinese people believe they are a luxury product worth having.

Why are these luxury products in China so expensive?

We’ve talked about wants and needs, and have looked at the desirable luxury brands in China. While this information is interesting, what may be more important is to find out why luxury products are so much more expensive in China than identical products sold in other parts of the world.

Let’s take one example. A Chanel Timeless Classic Flap bag retails for 3,100 euros, or 3,839 US dollars in France. However, when we look at the asking price for the exact same bag in China, it is marked up by 34 percent to 37,000 yuan, which is the equivalent of 5,850 US dollars. That’s a ridiculously high price difference for just a bag.

So the question is: why the hike in price?

The answer ultimately comes down to taxes and various marketing costs involved in selling these products in the lucrative Chinese market. When we talk about marketing costs, we are really talking about circulating goods throughout the various outlets and stores in China. This is directly related to the fact that China’s import tariff is higher compared to other countries around the world. The import tariff can range anywhere from 6.4 to 25 percent. And, as if that isn’t enough to drive the prices up, luxury items that enter China are subject to value-added tax, business tax and consumption tax. After all is said and done, and these various taxes have been applied, the price for luxury goods goes through the roof wherever they are sold in China.

luxury product in china

How people combat higher prices

What many Chinese people decide to do is go to other countries to buy luxury products for themselves, their friends or their family. While traveling long distances for things that are not necessities may seem crazy, it can be justified because the price differences are so huge.

It is not hard to understand shelling out a few dollars here and there, but when we are talking a price difference of 2,000 US dollars or more, it is understandable why so many Chinese people travel so far to acquire luxury goods their hearts desire.

And when we think about what we talked about in the beginning of this article – needs and wants and how we fill a void in ourselves – this strategy makes even more sense. We all have that constant yearning to acquire newer and better things. And when those things cost a ridiculous amount more in China, it starts to seem like a pretty clever idea to travel to a different country to buy the exact same thing.

If this article taught you something that you want to pass on, please share 🙂

Luxury Products in China: Why Are They So Expensive?
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