Pricing parity: Mission critical for Chinese tourists

Pricing parity: Mission critical for Chinese tourists

Do you know the equivalent price for each item in your stores around the world? Can you adjust for implications from currency exchange rates and country and local sales tax? Your Chinese tourist consumer does. And if you want to analyze shopping behavior and consumer preferences, you should too.

More than 50% of luxury purchases from Chinese consumers occur overseas.Although there are other issues contributing to this phenomenon, none is more powerful than the drive to purchase luxury goods at lower prices than are available in China with its high VAT taxes and import duties. With price as the underlying motivation driving these purchasing decisions, it stands to reason that price parity and price awareness are key issues for luxury brands as they target this consumer group.

Key areas for brands to examine:

- Know your product selection and product pricing in China. This is the number one comparative benchmark for your consumer.

- Know your product selection and pricing for other key markets for Chinese consumers, especially Hong Kong.

- Identify stores in your network with the most attractive price offering, taking into account currency and sales tax issues.

- Determine likely consumer travel patterns to identify stores with overlap and price inequality.

- Develop your threshold for offering tax rebates to account for pricing inequality across stores.

- Exclusive or hard to get merchandise is more immune to price parity issues. Identify your merchandising strategy to promote these items in stores with price inequality.

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