Expert: non-tariff cause high price of foreign brands in China

On February 14, CCTV "news studio" broadcast "non-tariff caused experts: the high price of foreign brands in China", the following is a text transcript:

Host: just now we communicate with Mr Jiang Changjian everybody to go abroad to buy foreign brands, that although you are optimistic, but I think we still need to further to analyze the reason about the profound reasons behind the tide of shopping, that is to say may go abroad to buy you a very important reason is not only to leave the country, to buy a very important reason is that cheap, when it comes to pursue cheap, in fact, in Chinese culture began to everybody is a little not too not bashful open, feel like a little showed, but the actual is that when we compare the price difference, found that is definitely not a petty gains, but a considerable price difference, so you might ask, why are these foreign brands in China, the price will be have such a big change, increase so much? Let's listen to consumers is how to do.

Reporter: is much cheaper than in China.

Beijing passenger: yes, because of tax exemption, points will be deducted taxes.

The Chinese import tariffs to be changed, or to foreign countries to buy things.

The customs import things are to be of taxes.

If your foreign to domestic shall not pay tax.

Hong Kong tourists: think it must be cheap.

Reporter: why will feel here must be cheaper?

G: Hong Kong tax exemption is not.

Hong Kong things cheap, without a tax.

Paris: passenger tariff policy of the country.

General situation is his duties.

G: London countries should be more open some duty-free shops in like hainan tourism dc.

Dubai sales staff: because China customs walk much more special, so here to sell cheap, because the country is not taxed.

Stam g: including Hong Kong also more expensive than here, this way is cheaper.

China is not to luxury prices down?

If yes, China luxury down will be less than foreign consumption, will be in domestic consumption.

Host: just now is our reporter interview, in this random interview can see a lot of consumer are considered high tariffs have pushed up the prices of these foreign luxury brands, but the fact is it true? In order to understand the real situation, starting in April last year, our reporter spent nine months of daily necessities, clothing, bags and so on different commodities for a worldwide field investigation, the result how? See together.

Explanation: this is Leeds in the knicks Harvey department store in a counter on the second floor, the reporter found the burberry brand, in the mall, the shop of the brand is not independent, but and other brands together, this is the classic brand scarf.

Shop assistant (Harvey Leeds knicks department store) : very comfortable, feel is very good.

Explanation: the salesman told reporters that the whole market now only one color of the scarf, because not tight goods, they have not stock, over time have other colors to the shop.

Journalist: how much is it?

Shop assistant: 275 (euro).

Explanation: according to the exchange rate of the day, the price of this scarf into renminbi is less than 2300 yuan.

Reporter: if have a travel passport can enjoy tax refund?

Salesman: traveling passport, yes, if you have a travel passport can enjoy more than 10% of the tax rebates.

Explanation: so, the cost of the scarf at the very most no more than 2100 yuan, the sea, the scarf will be to impose tariffs on how much? The reporter dialed the telephone of the customs.

Reporter: general cashmere scarf into such as burberry, the customs duties?

Chinese customs consultation telephone: 12360 tariff is 25%.

Explanation: according to this standard, and 25% tariff, the price of this scarf is not more than 2600 yuan, in order to understand its sales price in our country, the reporter walked into a store in Beijing, is different from the second position of stores in the UK, the most prominent position on the ground floor, the reporter found the scarf.

Clerk (Beijing mall) : is a cashmere scarf.

Explanation: different from the counter, the brand scarf in this mall both style and quantity are obviously a lot more.

Salesman: have a try, there is a mirror, it is 4500 (RMB), big () have little.

Explanation: this kind of scarf price 2100 yuan in the UK, plus 25% tariff price also does not exceed 2600 yuan, but in China mall price was 4500 yuan, in Paris, France, the Louis vuitton bag price of less than 7500 yuan, plus a 10% tariff does not exceed 8500 yuan, while in China selling price is 12700 yuan.

Reporter: 12700 (RMB).

Clerk (Beijing mall) : that's right.

Explanation: in our survey, it is not accidental, bags, watches, jewelry and other kinds of product price plus there are foreign countries tariffs are still much lower than China's domestic prices.

Host: speaking of tariffs, we are now turning to India again, our reporter survey found in India India tariffs actually higher than our country, but also the foreign brands in India selling price is lower than China, is this why? Take a look at first.

Explanation: compared with China's customs, many Indian higher tariffs, in China, the average tariffs on imported goods concentration between 10% to 10%, and general goods tariffs in India are as high as 30% to 50%.

Reporter: high tariffs is often considered as luxury high up the main reason for the price, but that is not the case.

Explanation: now you see this Louis vuitton bag, the price is 12700 yuan RMB in mainland China, in mumbai, India, and higher than in China after nearly double tariffs, price of 11700 yuan, the burberry classic scarves in mainland China is priced at 4500 yuan, while in mumbai, the price is 3700 yuan.

Reporter: costs and tariffs far not important factors, and to see if a market has a strong purchasing power and a keen desire to consume is the key to influence the luxury goods pricing.

Explanation: the only new Delhi, mumbai, two places have a big international brand shop, this is the famous taj hotel in mumbai, there is a dior, Louis vuitton brand, but the two shops are almost empty, most Indian people think they have nothing to do with their lives.

Mumbai citizens: like my shopping to the shopping center, because of here make a three to fifty percent now, I am sure won't go to Louis vuitton store, spend so much money to buy a bag, spend the money I can buy 20 different goods here.

For ordinary people not frequented this (luxury) store to buy any goods, because the price is too expensive.

Explanation: the international brand under India's high tariffs and to lower prices, customers make a profit for India, but India customers aren't buying it, in India, the international brand of sales was $846 million last year, only accounted for 0.5% of global international brand sales, one of the big four accounting firm KPMG international company manager ana DE Raman Nathan also said that in the potholed streets is a big international brand store no benefit.

Host: well, then we could lead to this attachment in new Delhi, India reporter jian-bing wang, know exactly what luxury brand sales in India, how are you building.

Jian-bing wang: hello hai xia.

Host: through after you give us the short film we have awareness, the international luxury brands in India a market like this, not as hot as the domestic, understand the relevant situation in India, according to you in the face of such situation, each big international brand they have to make some reduction in India or the sales promotion behavior?

Jian-bing wang: ok, it is India's luxury brand sales is such a situation, he said his whole indians he average wage level is very low, for example in new Delhi, for example, his average wage was in one thousand, so people buy this luxury is very limited, in the past these years, many people if he was actually some capable of luxury consumption crowd, if he buy consumer goods many times he is flying to Paris to dubai directly, or fly to Hong Kong where to buy these luxuries, but this a few years, is some luxury goods some dealers in order to retain his guests, he consciously in India to do some development or do some promotion, such as his conscious skiving some of his profits, which makes some people abroad to buy these luxuries, he compared his cost and said go out and buy in India he basically cost is the same, so slowly in India this luxury consumption market are cultivated.

But India's luxury consumption he and domestic is different, is a lot of people he might not be in the Indian market to buy some bags or clothing such kind of product, the most popular luxury in the Indian market is mainly some watches and jewelry, and we know that the market, so these products, he said the price is probably cheaper in China around 3/1, so we can see is the future of this market is also gradually on the rise, but because the overall is still low, so I believe that the market is not too big, but he will grow slowly, hai xia.

Host: India, too, are in conscious culture, cultivate some of your local luxury brand consumers, in addition to like what you have just talked about, some measures to cut prices for domestic customers, he's big businesses in India is there some other promotion measures?

Jian-bing wang: come India work two years later, in fact we have a very clear sense, that is a lot we feel very aristocratic some products at home, but he is often a very common in India in the price of the mall, such as domestic very familiar with such as tommy, CK or so Levi's, some of the products on the market in India his price is very low, for example in the case of Levi's jeans, he's probably average price in four hundred yuan or so, and got some promotion season, for example is his year-end sale season now, he is very big of the discounts, forty percent or forty percent such a level, so many of these products in get about $200 can buy a pair of jeans, so the price is very cheap, is a lot cheaper than China.

So the reason is the main reason I think may be because these products in the localization is an important reason, such as Levi's, so we just mentioned and wood (note) this product, his entire nearly 3/1 the price will be cheaper than China, so these years many to India on a business trip or visit friends, one to this is very surprised for that price, often buy a lot of such products to go back to China, so it may be the localization product greatly lower his this price on the market pricing level, hai xia.

Host: well, thank you soldier gave us very objective and persuasive such an analysis, indeed like India 30% to 50% tariff did not become push Gao Yang brand of one of the most important driving force, let us also has a new understanding to tariff, so I think the survey is also a very convincing, it seems that the commodity prices around the discretion of the tariff is not one of the most important reason, which you can also be correct for a long time in our mind is very persistent an idea about the tariff. With such a conclusion, what decided a commodity to sell how much money do you have any standard? Commodity price is depend on what to decide, we have come to show you a formula, let's see, the price of the goods.

The sale price of a commodity is basically by the formula of this several factors to determine, commodity pricing (sales price = tariff + pr + brand value + + raw materials processing cost + channel cost), that just now we talked about the tariffs, this I also want to live with us in Mr Commentators Jiang Changjian together to discuss this among several factors, so we just said to tariffs, tariff that at present China is basically a concept of what?

Basically, if is a luxury, Jiang Changjian 20% to around 30%.

Host: were lower than India, such tariff levels in the world is what kind of concept?

Jiang Changjian: belong to moderate, is not too high nor too low.

Host: is moderate, is a moderate conditions, so such a tariff level is not should be pushed up makes us the commodity price is so high.

Jiang Changjian: the price of the tariff, if you add in the price of the tariff, if you buy the same goods in France, you add the price of the tariff, it's not that we see the final price products in retail stores, so the price here is just like you just of the chart also talked about, he and the other a number of factors, such as the cost of the channel, for instance if some he is not a direct selling, he have a distributor or agent, so this part of the agent cost and so on, also including the cost of these costs of the market marketing, all in the formation of such a price, but in China, the market is a little special, because we are consumer groups, don't you see we have 1.3 billion people, as long as there is one over one thousand or one over ten thousand people interested in this product, the base of the market is very large.

The host: any one thing as long as x 1.3 billion such a huge base will change.

Jiang Changjian: what is the price of such a social foundation is there.

Host: yes, so we just said he is not only by the customs to the formula of this aspect.

Jiang Changjian: that's right.

Host: the formation of high prices, other also like the cost of production, as the cost of public relations, as the cost of the channels.

Jiang Changjian: the cost of the channels.

Host: can you give us a brief introduction, such as public relations, the brand to do what kind of public relations? Actually everybody word of mouth reputation has been a public relations.

Jiang Changjian: do you want to know a lot of people is not clear how much public relations to the value of the brand gain, a lot of people don't think you do public relations must be losses, but such as I am asked to give their brand publicity, is about two hundred dollars to send out, please you may be, for example, I'm sorry I don't know what the price, is certainly higher than me, so the cost will be playing in.

Host: is this some show.

Jiang Changjian: yes, of course, a lot of public relations activity involves many aspects, he just said, please celebrity, he has some such as the social public welfare of things, including many crisis public relations and with some companies of some routine public relations activities, the huge market for China's public relations activities, he has a certain cost of such a accumulation in there, there are channels, for example you go in the store, not to get into, in the channels of how much is charge probably later, he will give you a discount, then these will calculate the cost.

Host: it just talked about the pr, you actually spoke about say like to please a celebrity, because our identity is absolutely not allowed to take part in such goods show some of the activities, but in fact we have also seen actually like there are some other foreign films in Hong Kong, we also can often see some famous brands they can make such activities, but at home like this show or less on the mainland, so it is not can maintain their these foreign brands in the domestic public relations is relatively to the above costs less?

Jiang Changjian: it can't say that, it is the home of some of the public relations activities in major festivals or is a special day for the court or a lot of, some even the public relations activities to the bund of Shanghai, the exterior into interior view, you can see and know this batch of cost, so no matter what, there is a you must know, the Chinese market is not a foreign brands, a number of foreign brands, several foreign brands of similar products, and also has to compete with each other, this time is about to see bouquet also afraid of deep alley s just what you need to make, USES, so this big cost will accumulate in this regard, public relations and marketing and promotion.

The host: but we are actually compares two price now, is the price of domestic and overseas, and compare the price of goods, by contrast, for example the brand value and his pr in what do you think he invest abroad more or more in the domestic investment?

Jiang Changjian: it's hard to say, because of different market he has such a pr and marketing strategy here, such as a brand in his country, he is a relatively mature market, so his public relations strategy and a new market or a brand in the emerging markets of the developing countries public relations strategy is probably not the same, it's hard to say who specific who calculate is a much less, to be decided according to the enterprise's market strategy, different stages is different also.

Host: ok, we discuss just now in the process of commodity price formation of several major factors, in addition to these factors we talked about just now, and for example, such as cost of raw material processing and so on, so to say the cost of raw material processing, our reporter made a special investigation, because there are many foreign brands are now is for processing and production in our country, compared to Europe and the United States local production costs is small for a large part of the cost of the cost.

Explanation: this is a clothing production workshop in wenzhou, zhejiang province, in the more than 500 square meters production workshop, the workers working overtime is not a brand in wenzhou, but French brand dior dress.

A clothing company in wenzhou, and some of Europe's big in cooperation, and dior company last year we had a very good cooperation.

Explanation: in the workshop of the finished product in the exhibition room, the reporter saw the exhibition brand, shown above, including Paul, coach, burberry global luxury brands such as agent and the contract has the cooperation, the clothing factory in guangdong dongguan, also working on a brand of clothing.

Wu (dongguan), head of a clothing company, from raw materials procurement to garment production including branded in the late work, is basically done in our factory.

Explanation: although the origin of the problem is very sensitive in luxury goods group, but it has been an open secret in the industry, these foreign brands made in China once labeled abroad, homespun values.

Wu: such as the production cost of the dress we is in commonly 400 (RMB) to 500 yuan (RMB), but to the foreign sales prices generally will have 800 to 900 euros, luxury brands (profit) are generally in 10 times to 100 times.

Host: this data to let a person feel very surprised, the gap between the luxury brand value and the price will be in 10 times to 100 times, Mr. Jiang what do you think of this one?

Jiang Changjian: this is the value of the brand, such as I, for example, I might do a Chinese rice pudding is very good, the taste is also very good, you feel very good, but if I get a way to sell, put a blanket may not have how many pieces of selling out, or is not much, but if I play a packing, the Chinese rice pudding above such as what to produce, it is likely you my consumers could be flocking to the booth to buy, but the inside of the process including raw materials, including the inside of the form are almost same, and taste the same, what in where, in his sign, so you just see our production process is very good, actually right.

Host: we make has completely reached the international level of art.

Jiang Changjian: very high, he also tell you just now, cost 500 dollars to the cost, he might sell for thousands of dollars, he is actually on the value of the brand in it, at least is an important part.

Host: do you think of the current our country has not yet formed such a big international brand the most main reason.

Jiang Changjian: for this reason, in fact, many of our country was also a very high brand value actually, such as wine, right, you said he how much is the cost of production, but a bottle of wine can sell for one thousand dollars or even thousands of pieces, could you tell me the high added value, the brand is also very good, right, I'll give you another brand, Chinese herbal medicines, such as Chinese caterpillar fungus, put it after extraction capsule formation, do you know how much capsule for, he may be higher than the average Chinese caterpillar fungus price ten times or even more than twenty times, is this a luxury, affirmation is luxurious, but it has this aspect of the brand, but in other aspects are not at all, such as clothing, girls like bags, shoes, or a car that on the one hand, the national industry of our country is compared with some high-end brands such international, there is a big distance.

Host: our original ability are relatively.

Jiang Changjian: it actually the reason is very complex, a brand is to be honest, the first thing we did the brand consciousness, if any, is there anyone that the continuation of continuous down, or in history had interrupted, we play a question right.

Host: one hundred years old.

Jiang Changjian: that's right, the second problem is that in the process of brand construction of such a need for a long time can't get rich quick, so the brand is not rely on advertising to catalyst, and is very important on the one hand, in addition to you have a history of culture, there is a very important link, is to rely on your quality, right, it is also important, of course with the national industry of our country, especially these entrepreneurs began to pay attention to the brand, also bred in a slowly, slowly, I believe that over time will be able to make world-renowned brands to can speak, you just we see you just for example, a lot of brands have two to three hundred years of history, with America's coach, coach, he also was established since 1941, has so long history, so.

Host: he that is absolutely can't get rich quick.

Jiang Changjian: that's right.

Host: just now we talked about this formula, this formula is a superposition of all aspects of the factors of commodity prices, so we just talk about the costs, tariffs, pr, brand value and so on and so on, now we see that the front several are hidden, now, the last is the most important thing is the cost of the channels, now you may ask the foreign foreign brands in China why price so high, is it because in my country we channel cost is too high, make them in our store in the price of our brand shop he repeatedly raise, what reason is this, we continue to see the reporter's investigation.

Explanation: the reporter to the identity of the overseas brand agent contacted several line shopping malls in Beijing, said to rental stores, reporter saw the shopping center after the appointment of staff, mention the lease, the staff immediately inquire a brand.

A mall staff: if you don't convenient talk about brand so we can't talk.

Explanation: when the reporter asked how big is the difference, the staff did not taboo.

Reporter: some of the domestic brand if we store inside, then its button this point is how much?

A mall staff: 25%.

Explanation: the so-called buckle point is refers to the brand business part of the operating profit to the stores, the higher the buckle point to the cost of the mall will be high, buckle point and produce domestic market is now more common leasing mode.

A store clerk: I'm not in the position of the merchants said this sentence, I to a person (identity) said the words, they will think you want to come to you don't want to don't come, unless we (have) intention brand in particular, if the brand is bigger (position) should be (in) a layer, then discount may be lower.

Reporter: how much the discount will be low?

A mall staff: 10% lower, do you want to talk down () would you look at the brand strength.

Explanation: in order to let journalists believe that international brands can get more discount, the staff, for example, a shopping center in the best position.

A mall staff: if the discount is lower, the lowest to as low as 13%, 14% is possible.

Explanation: on another shopping center, the journalist from the reception staff directly tell the difference of local brands and international brands in the rent.

A mall staff: for example we may have some of the local (brand), may be it will thought it will go to a place in a good project, so it is willing to pay a higher price, some big brand is relatively low, the rent is low many, many low (rent) may be cut in half and then I just told you the rent you are half a cut.

Explanation: the staff with reporters to understand the shopping center.

A mall staff: this is Taiwan (brand), Beijing has just entered.

Explanation: according to her introduction, generally a layer of the location of the best shopping center are left to the international line brands, the rent will try to cheap, in order to show the grade of the goods, on the second floor, third floor for Japanese and Korean brands, more than four layers will only consider local brands, when a reporter asked why a local brand will appear in the shopping mall on the second floor, the staff explained.

A store clerk: there are some chain stores, it supports us, we will be given on some projects.

Reporter: in fact it is in the () on the second floor.

A mall staff: if so, we don't have to give it to them this is group (arrangement).

Reporter: the price of that they also spent very high?

A store clerk: yes, he said just now you also need to pay some cost.

Host: it looked very strange, this channel is no better than the domestic brands into the store cost is higher, so why tariffs also belongs to a more normal, and the cost of raw materials are cheaper than similar foreign, channel cost is low, why a commodity across to the Chinese social status would be steep rise so much, have expert analysis says this is because of foreign brands in China themselves pricing increased and improved a lot, whether that is the case? We continue to see the reporter investigation.

Reporter: a lot of people think Chinese luxury expensive, on duty, what do you think?

Xiao-ming lu (montblanc's former President) : I think the problem might be a little partial, the tariffs dropped actually does not change China's luxury retail price changes, most of between 10% and 20% is one of China's customs duties, we, for example, a product such as a bag, if the retail price is 30000 dollars, it if the price of cif China if is fifteen thousand yuan, 1500 yuan, 10% of duties, if let off this 1500 dollars, how much do you think will be in thirty thousand yuan inside, may brand companies do not take this 10% back to consumers, it will naturally become his profits.

Reporter: why luxury goods in China they expensive?

Xiao-ming lu: brand of pricing policy, I think, he pricing itself into the emerging market than Europe certainly high, than in the us market is high, the luxury brand in the Chinese market profit frighten to death you, very good profits.

Explanation: xiao-ming lu told reporters, with more than 10 years experience in the industry, so the foreign brands in China since the manipulation, to some extent, and the Chinese department store's attentions.

Xiao-ming lu: what are you going to sign, that when these signs come they will relatively lower himself to talk to the brand, or even talking about a possible I see today is not a reasonable price, subsidies decorate even wish the road at the door to modernize in accordance with the requirements for the brand to a whole, the whole point is low.

Explanation: in xiao-ming lu view, improve China's price can be said to be the foreign brand sales strategy, first in China to raise prices, make rich, on the other hand, local businesses to lower prices in Europe, the European Union to implement tourism drawback, and the China price gap, and to attract Chinese customers drive the local tourism consumption.

Xiao-ming lu: one of the best shops in China, either in Beijing or Shanghai, is also likely to happen to it there is a shop on the champs elysees, wonderful in the house there is a store, the store may be Chinese, 70% of consumers, it is also for the Chinese service also has our Chinese consumers are willing to go there to travel and shopping much good, so I came to see the eu's simple, why should the eu to around 12% of the tax refund policy, is stimulating tourism consumption.

Host: see the reporter's investigation and reveal the personage inside course of study, we then wired up the industry experts, foreign economic and trade university professor rainbo, hello professor zhou.

Rainbo: hello.

Host: just now we looked together, now the prices of these foreign brands in China is quite high, for such a high price for the personage inside course of study how do you see? The other monopolies, such a high price?

Rainbo: in fact in any market there is the possibility of violence at the beginning of development, these foreign brands to dare to set such a high price in China, first of all, they deliberately and openly for know a market strategy, then you have several cost is analyzed, such as customs taxes and fees for this piece, actually according to the data of my master, our country's government has been lower consumer goods import duties, but on the one hand, foreign brands have their products imported to China later, they are strategy is very reasonable to use a variety of ways for tax avoidance, such as imports of raw materials, semi-finished products directly processed in China, even in China there are such a good generation of processing plant, so as a direct result of the actual products of foreign brands of the manufacturing cost is very low, so we often ignore the problem, these foreign brands in the local price with it in Europe after the stick a card, and then back to China already exists between the price of a profit space, the actual manufacturing costs in China as well as his between the cost of the production on the market and also has the very big profit space, but the profits which go to, actually by these foreign brands is very reasonable and clever move to the other link, and our customers our public don't see it, so actually shut tax only foreign brands in China raise the price of a good excuse to cover up their such ACTS of violence.

With customs taxes and fees as an excuse at the same time, also can be very good to produce a brand of bargaining power, better in China for a business cooperation space, such as in small pieces you see just now our store loss-leader, at zero rent please these international stars, another, everybody also ignore to the western brands to abroad market do market investment, but to a country like China, he think I am a luxury brand, I am a foreign brands is a good thing, you should buy my Chinese, why would I do propaganda, so the cost of this seemingly place makes these foreign brands in China to a very high, very strong bargaining power of a brand, so they in China to do a what thing? Is at the primary stage of development of the market, the consumer can accept such a range with profit maximization as the principle for high price, so to control a dominance of the market.

The market strategy, of course, such a strong brand of bargaining power also needs to have a photograph with the basis of a market, we also know that the Chinese consumption habits have so few characteristics of the Chinese to buy or not to buy up, Chinese people overseas consumption time always think to buy this make the more, the more and the third Chinese psychological bearing psychological is very serious, they always feel stick to buy, this is a good thing, in addition the Chinese still have a kind of psychological......, the brand new things is a good thing.

Host: that's right, perhaps this is relatively a bit misshapen consumption psychology of Chinese consumers make these foreign brands in China dare to such a high price to appear, well, thank you very much professor rainbo bring us the analysis and interpretation, and then we go back to the studio, finally have a little time to Mr. Jiang, please give us analyse, in the face of such shopping boom, in what way to look at it?

Jiang Changjian: I think consumers have to be very alert, like foreign brands speak what are some of the price of the composition of the reasonable part, which is the unreasonable parts, these unreasonable part why want to let the person to pay, I believe that in addition to those you have just told consumers psychology, more important, consumers are also very rational, beyond this, if the price of foreign brands of the policy of high earning high profits, make consumers pay for such a situation cannot continue for a long time, it is on the other hand.

Host: well, it seems we are to the correct view of the overseas shopping behavior, at the same time, relevant supporting measures are to be able to keep up with, make Chinese consumers to buy the rest assured.