Why Are Luxury Goods Hard to Sell in China?

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Aug. 22 (Bloomberg) –- Bloomberg’s Caroline Hyde reports on why luxury goods makers are having such a hard time selling items in China and offering deep discounts on their merchandise. She speaks to Manus Cranny and Mark Barton on “Countdown.” (Source: Bloomberg)

Chinese consumers for their appetite and willingness to pay for luxury.

It seems the fashion houses are becoming tougher to sell in china.

Caroline hyde is here.

Rate bit of investigative journalism going on in business week.

We all know that so many of these luxury goods makers, kering, lvmh and the like, all have been having stores in china focusing on spending.

For the first time, we are seeing discounts, heavy discounts going on.

In july, ferragamo leather palms, 40% off.

Gucci, a leather shoulder bag discounted by 30% in downtown shanghai.

Dior, all these stores are doing discounts.

Others are doing them really well.

Many of these luxury companies are terrified about seeming to the bargains.

They don't want to be seen to be that.

They want to keep the a lower -- allure of luxury.

Hermes, half-price dresses and shoes.

It was invitation only, a sale in a hotel.

Barred from taking pictures.

Cartier, they sent out a chat message to some of their most loyal customers and said, we have got a high jewelry exhibition.

All pieces are at hong kong prices.

You had to contact the sales department to go.

Is this because of the tax on chinese imported goods?

There is a real slap on these luxury goods.

Is it to keep the customers who aren't traveling happy in china?

All of those.

One key reason this is happening is because there has been this crackdown on giftgiving.

We are seeing far less luxury spending in that respect.

The other part is, it is so much more expensive to buy in china than when you are traveling abroad.

Not only do you have import taxes up to 25% on some products, you have a consumption tax on certain luxury items.

Anywhere up to 20% to 30%. they are saying, it costs you basically 50% more to buy in china.

They have this great interview with a marketing executive.

She went traveling and picked up a louis bag for about $1300. that is half what she would have spent in china.

She said, that is basically my entire ticket to go around paris.

Why not buy when i am abroad?

I think what is terrifying for these companies is how important the chinese buyer is.

One third of all luxury goods bought by chinese people.

In 2011, we saw growth at 30%.

This text has been automatically generated. It may not be 100% accurate.

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