Edward Mills

Everybody wants luxury, but not at any price

By Edward Mills (China Daily)
Updated: 2010-07-29 07:48

If you've ever walked into any of the familiar looking Western luxury brand stores around Beijing, chances are you've walked straight back out again when noticing the less familiar prices. Luxury goods are unbelievably high-priced in Beijing, due to a combination of high tax and store owners desperate to exploit the immodest egos of Beijing's new money.

Foreign luxury items are subject to a significant tax on entry into China, aimed at redistributing wealth and, judging by the sales figures, this must be a huge amount.

Certainly cash can't buy class, but it can buy the outrageously ostentatious Louis Vuitton bags that adorn many of the women's shoulders in the capital these days. This gaudy nature has not gone unnoticed around the world, where the traveling newly wealthy of China have even made an impact in London, with some comparing them somewhat unfavorably to Russian shoppers.

Due to this phenomenon, high prices apply across vast swathes of imported brand names in Beijing from Wangfujing to Sanlitun Village and such stores aren't short of customers snapping up their overvalued products.

Not all consumers are quite so flash with their cash, but many still want the quality and superior design that Western brands offer.

Where to find these products? Well, you certainly can't find them in the markets at Silk Street. The labels may seem a bargain at the time, but a few washes and the difference between "Armani" and "Armeni" is clear to all.

Hidden amongst the countless pages of counterfeit goods on popular Internet shopping forum Taobao, the legitimate traders list their wares. A great number of these online stores are based in Beijing, run from residents' homes. One is even based in my apartment complex.

These traders draw on contacts abroad to supply goods that substantially undercut the official outlet price. In fact, the prices are so reasonable that many of those walking down the street are likely to have purchased from these sources.

Sadly, such a process has not gone unnoticed by those in power. Chinese customs are purportedly concerned by the vast cost disparity between luxury goods sold abroad and those in the home market.

Rather than reduce the import tax to encourage more people to buy luxury goods in China, the authorities have decided to lower the threshold for personal goods coming into the country per package to attract financial penalties from a reasonable 500 yuan to a paltry 50 yuan.

This change, which may take place as soon as September, will likely catch the vast majority of legitimate Taobao traders and if, rigorously enforced, could see the end of these products being sold at realistic prices in Beijing.

It's a blow for those who wish to buy quality Western products at fair value, but of course may see benefits for local businesses.

The only mild reprieve is the opening of many international brands' online stores to Beijing's consumers, offering more choice and price competition for residents of the city.

As long as prices for foreign luxury goods in China remain unrealistically high compared with their prices in other countries, many people will simply end up saving their cash to buy such products the next time they are outside of China.