Chinese Grey market channels can still the cheapest channels to buy luxury goods anywhere in the world.
While the weakening of the Japanese yen is providing consumers a good excuse to travel to Japan and spend on luxury, a little information gathering shows us that in fact they may be better of staying at home or going to Europe.
Looking at the price index to China prices against those for Hainan, Japan, France, and grey market channels in China we selected a few items for a brief experiment.
Tax Calculation:
📊 France – VAT is set at 20%, however on purchases in boutiques consumers process the VAT refund through suppliers Global Blue or Planet Tax Free (others may be being used). These companies will typically take a certain amount of the refund as their fee, and most consumers should expect anywhere from 10-12% VAT return (11% was used).
📊 Japan – VAT for luxury is set at 10% on purchases over 5,000 Yen. Like France, many companies offer the ability to obtain an immediate refund/not paying the tax at point of purchase. Payments are processed through Global Blue taking 1.55% of the tax-free items’ price. This makes it somewhat variable but 7% was used for the purpose of calculation.
📊 Hainan – while there is some flexibility in what brands can offer in Hainan, from people I spoke to there is a ceiling of 13% tax rebate available from China mainland prices. For this calculation a standard 13% deduction was taken from the China price.
The prices/indexes shown in the figure were calculated using the listing price as of 13th of August on each of the corresponding brands local websites, and a currency conversion rate of 0.049 Yen to RMB and 7.85 EUD to RMB.
🌏 The Louis Vuitton Carryall PM Mini and Celin Triomphe Canvas Bucket are available cheapest in France with indexes of 73.7 and 75.5 respectively. While Fendi’s Origami Mini and Gucci’s Marmont Supermini both bottom out on the grey market at 68.3 and 68.7 indexes.
🌏 In all cases France is cheaper than Japan, but the difference may not be significant enough to offset the time and money spent for Chinese consumers getting to Europe.
🌏 However, it remains that consumers can access these goods (if they are willing to forego the brand experience and take a risk on authenticity) from the comfort of their homes for cheaper or similar prices than going abroad.
🌏 There may be other offers that allow further reduction of prices such as those offered by department stores or membership programs, but from a high level it seems that France or the grey market might wind up being the cheapest options.
