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Luxury brand price cuts expected

News, 09 April 2015

SHANGHAI: After French fashion brand Chanel cut its prices in China last month, prompting a surge in demand at its stores in Beijing and Shanghai, analysts now expect other well-known luxury brands to follow suit.

Dior, another French fashion brand, as well as Swiss watchmakers Patek Philippe and TAG Heuer, have reduced their prices in some Asian markets – sometimes by as much as 40% – the South China Morning Post reported.

Prada, the Italian luxury fashion house, is reportedly the next European company to be thinking of doing the same, at least according to the Beijing Morning Post.

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But what is certain is that luxury brands have been under pressure for some time as the authorities have cracked down on gift-giving by officials and as the strong currency has encouraged Chinese consumers to shop abroad.

According to the Fortune Character Institute, a Shanghai-based consultancy, 46% of the world's luxury goods were consumed by Chinese people in 2014, but 76% of the spending took place abroad.

As brands seek to encourage them to spend more at home, Zhou Ting, director of the Fortune Character Institute, forecast that price cuts by luxury brands in China "will become the norm".

"It's certain that other luxury brands will follow Chanel's model and cut their retail prices in China and other Asian markets," Zhou said.

"This would be an effective tactic to boost local sales in the short term, although it could also bring the risk of devaluing the brand to become more common fashion in consumers' minds."

Shoppers are braced for more special discounts and lower prices will gradually become the new normal, Zhou added.

Data sourced from South China Morning Post, Xinhua; additional content by Warc staff