Luxury brands are expanding faster than ever in Beijing (home to more than 150,000 millionaires), but according to Wang Yao, deputy secretary-general of the China General Chamber of Commerce, China's stiff luxury tax is leading more consumers to buy in Hong Kong or abroad. Wang, speaking this week to China Daily, said that brands such as Burberry, Louis Vuitton, Gucci, Chanel and Prada, which had only opened a total of six new stores in Beijing between 1993 and 2007, are now opening Beijing locations at the rate of at least one per year.
From China Daily:
As the capital, Beijing attracts many wealthy people from other cities to consume luxury goods, Wang added. However, Wang said there are still factors limiting the consumption of luxury goods in Beijing.
"Price is the biggest obstacle in Beijing," Wang said.
The price of luxury goods in Beijing is 20 to 40 percent higher than overseas thanks to the high luxury tax, Wang said.
"I never buy luxury bags in Beijing since I know it can be much cheaper in Hong Kong," said Wen Jing, a 25-year-old woman working in Beijing.
Wen said she lived in Hong Kong for a year in 2008 and found that she could buy luxury bags at a lower price than even the discount price in Beijing. She said some of her friends would rather go to Hong Kong once a year than shop in Beijing.
China's prohibitively high luxury tax is a topic that comes up often in the luxury industry. Why, many ask, do companies with global prestige continue to plow in to the China market when their stores in top-tier cities like Beijing and Shanghai often serve more as showrooms than points of sale? It's understandable that many luxury brands are moving inland -- as second- and third-tier residents with the means to afford high-end goods are more of a captive audience, less likely to jet off for overseas shopping sprees -- but for the moment, despite the increasing presence of top brands in places like Beijing, they won't see meaningful growth until they can figure out how to get potential customers to shop locally.