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Fashion
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Optimizing pricing strategies as domestic travel picks up
Use the Retviews platform to benchmark your offer against your competitors
Designer bags are essential to fashion brands as they can stand as a luxury brand’s most distinguishable symbol. According to the Business of Fashion Insights report, the global consumer spending in the leather goods category grew to $72 billion in 2022 and is expected to reach $100 billion by 2027. This growth will occur mainly in the US and China, the two largest markets for designers’ large and small leather goods.
The Chinese government lifted its zero-covid policy in early December, thus relaxing strict travel restrictions. Known for their luxury spending overseas, Chinese tourists are once again allowed to travel to global shopping hubs such as Paris, Milan, or London. However, in light of inflation and the energy crisis disrupting the Western economy, should we expect a shift in favor of domestic spending?
Many designer goods are manufactured in Europe because it is synonymous to craftmanship and design. Since there are significant price disparities with other markets, it is common for American and Chinese shopping tourists to take a trip to the continent to snatch a good bargain on luxury brands. When the Chinese Renminbi is currently trading at 14 cents and the US dollar at 92 cents, there is an understanding of how tourists are drawn to Europe for luxury shopping.
Retviews data reveals that there are significant price differences between luxury leather goods in Europe, the UK, the US, and China. Specifically, the price of a Céline Cabas Triomphe bag in France is notably lower than that in the US and China, with Chinese consumers paying $3,675 in comparison to 2,400€ ($2,616) in the French capital, making the bag 41% more expensive in China.
Despite the UK also offering attractive pricing for these products, luxury shoppers are increasingly favoring Paris or Milan as their destination of choice over London. The removal of the VAT refund for tourists from outside the EU in 2021 has further fueled this tendency. As luxury goods prices continue to rise, how can brands best manage pricing strategies on an international scale, so as not to lose consumers?
The Gucci Horsebit 1955 bag has become increasingly more expensive over the past year, with the price having risen twice since the beginning of 2022. As of today, the bag's price has reached a staggering 2,725$ (2,500€). As Retviews’ data show, the Horsebit 1955 has exhibited a 14% price increase YoY in the European market, compared to a 15% YoY increase in the Chinese market.
As China luxury sales are expected to grow between 25% and 35% this year, European luxury houses are investing heavily in China. During Covid restrictions, mainland consumers had to look towards domestic stores to answer their luxury needs, and more specifically the tax-free island of Hainan. In 2021, Hainan accounted for 13% of China's domestic luxury spend, versus 6% pre-pandemic, and tax regulations are set to continue to loosen.
So, the real question is whether luxury shopping tourism towards Europe will eventually resume and come back to what it used to be before the pandemic? Where Chinese shoppers were buying 70% of their luxury goods abroad, experts claim that it will eventually become an even 50-50. As travel restrictions are lifted, destinations such as Hong Kong, South Korea and Japan are top international destinations for Chinese shoppers. So, what does that mean for luxury brands?
Looking at the state of international prices within the luxury sector, Retviews’ data show that high-end luxury players are maintaining a lower price point in Japan than in China. Aside from several brand-specific exceptions, China remains the most expensive Asian market for luxury leather goods. The prominence of the Chinese market and its generally high price point begs the question of whether domestic purchases will continue to stand out, and if we will see luxury brands adapt pricing strategies accordingly? Will other Asian markets gain traction instead?
Despite the pricing disparities across markets, Chinese shoppers have shown a strong preference for luxury shopping in Europe. This could be attributed to the broader selection of designer goods available from European retailers, which appeals to Chinese consumers who are eager to stay up to date with the latest fashion trends. Aside from pricing, a lack of assortment variety could also be a hindrance to domestic luxury shopping.
As proven by Retviews’ data, luxury brands have significantly increased their investments in China. Two of the most popular luxury brands in China, Gucci, and Louis Vuitton both have a larger assortment of leather goods in the Chinese market, than in the French market, namely Gucci who has nearly triple the amount of leather goods in China than in France. Louis Vuitton on the other hand, has 19% more leather goods in its Chinese assortment, than in France.
As China grows, Japan has also emerged as an attractive country for luxury shopping due to its lower prices. Nonetheless, the Japanese market lags behind Europe in terms of the size of its leather goods’ offering, with a 14% smaller selection of handbags available in Japan compared to France. Overall, these market trends highlight the importance of data-driven analysis in defining the ideal international pricing strategy for fashion brands. Therefore, Retviews comes as a brand’s best ally in making data-driven decisions in a fraction of the time spent manually tracking competitors.
The Lunar New Year celebration is a significant event in Chinese culture, and luxury brands have recognized the importance of this occasion for their Chinese clientele. As Chinese shoppers prepare to return to Europe, luxury brands have made strategic investments in Lunar New Year-themed collections that feature animal zodiac items, often presented in a red color symbolizing good luck, happiness, and prosperity.
Year of the rabbit collections have been popping up along numerous luxury brands, and Retviews’ real-time data show the difference in pricing strategies between leading luxury brands Loewe and Burberry. Taking a closer look at the pricing structure behind the collection, Loewe’s assortment covers a wider price range than Burberry thus catering to a slightly larger audience, with a lower entry-level price and a 24% higher maximum price than Burberry’s.
Considering the current economic shift, understanding the best way to target each international market is critical for fashion brands. Discover how Retviews, the leading competitive intelligence platform for fashion can help your brand optimize pricing strategies across markets and nail your assortment on an international scale. Don’t miss out on the real-time data that fashion’s leading brands are using to stay ahead of the game.
Use the Retviews platform to benchmark your offer against your competitors
