Warc Blog

Chinese consumers resist high prices

5 September 2013
SHANGHAI: Chinese consumers have begun to push back against the high price of many products in the country as increased foreign travel and e-commerce reveals how much more they pay than their US counterparts.

As the Wall Street Journal reported, some of the price discrepancies are because of import tariffs and government taxes, but research from Shanghai-based consultancy SmithStreet has shown that many basic goods remain more expensive in China.

It compared the prices of 500 items of 50 brands in China and the US and found that clothing and other apparel is on average 70% more expensive in China.

Coffee and ice cream also attract a much higher premium. The research found a scoop of Häagen-Dazs rum raisin ice cream cost $5.40 in Beijing, but only $4.68 in Washington DC while a Starbucks grande latte cost nearly $1 more than in the US.

Many Chinese consumers complained last year after Starbucks increased its prices and took to social media to call for price controls. Starbucks argued that it faced higher real estate costs in China because consumers there prefer larger stores.

While Chinese consumers seemed willing in the past to pay a premium for the status value of imported brands, there is a growing trend for them to put off buying goods until they travel abroad, according to James Button of SmithStreet.

For example, it was widely reported earlier this year that Chinese consumers cleared out UK and Hong Kong grocery shops of baby-formula, which was cheaper than at home but also viewed as safer.

The Chinese authorities have taken note and regulators have launched inquiries into the cost of auto, pharmaceutical and baby formula brands.

However, some analysts have also pointed to the high cost of setting up a business in the country.

Rocky Lee, of Beijing-based law firm Cadwalader, Wickersham & Taft, said opening a shop can take months and all the costs of bureaucracy are then passed on to the consumer.

Data sourced from Wall Street Journal; additional content by Warc staff

 
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