Wuhan Zhongnan Buys Luxury Goods Overseas On Behalf Of Shoppers#
One of the biggest obstacles for greater profits for imported luxury brands in China is the high luxury tax, which can double the price of some goods. To get around this high luxury tax, many Chinese shoppers simply hop over the border to Hong Kong or Macau for duty-free shopping or get online and purchase them through e-commerce portals like Taobao (where most of the shops selling real luxury goods are run by Chinese students overseas).
Perhaps taking a cue from these Chinese luxury consumers, a retailer in Wuhan -- a second-tier city in the southeastern province of Hubei -- has announced a new service that will offer shoppers luxury goods purchased overseas by the company's buyers. The retailer, Wuhan Zhongnan, says on their online shop (Chinese) that this "global service" offers "never before seen, great prices" on European luxury brands, and sells "top international brands without any added shipping fees," a pretty clever marketing point, if nothing else.
[Wuhan Zhongnan] has set up a team full of professional buyers to make purchases of goods under the world's most luxury brands such as LV, Gucci, and Prada. Such a move by the company is meant to cut the middlemen and save costs for consumers. Hao Jian, chairman of the group, says that the group hopes the new service can help the department store differentiate from its rivals and find new ways to sales.
Insiders point out that costs of shipping, logistics, tariff, and insurance make prices at Wuhan Zhongnan Commercial Group just slightly cheaper than the special stores of luxury brands in China.
As the article notes, the added costs of procuring, shipping and paying duties for the imported goods means Wuhan Zhongnan's discounts are pretty insignificant, but the retailer will likely benefit from the novelty of (and press attention to) their new service. Additionally, if Wuhan Zhongnan's buyers are smart enough to purchase limited edition items not currently available in the mainland market while on their overseas excursions, consumers back home will probably be even more interested in the service.
While this story may prove to be more of a publicity stunt than a workable strategy for attracting customers, it does show how many retailers -- both traditional department stores and independent online stores on Taobao -- are looking to circumvent China's high luxury tax by cutting out the middleman.
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