The luxury goods maker from Europe, LVMH is experiencing repeated blow from the China market. The maker of the luxury brand Louis Vuitton confirmed after its first quarter conference call to crackdown on people that do bulk buying in European markets to sell at lesser prices in China, in the grey markets.
The scenario is quite contradictory, an indicator of diluted market having high currency valuation and high price differences in the gray market. The chief financial officer at LVMH commented in the conference call to have put strict restriction on the purchase people can make. He also commented on the unsure situation in the store, if individuals make purchase for themselves or to sell in the gray market in China. The idea of the drive is not to compete for its own products in China market though it does not seem to be bullet proof.
LVMH speculates it is worried about becoming a cannibal involuntarily. This is so because people are successfully buying the brand in European markets in bulk and selling them at discount prices in China markets, the move will enable to compete with black marketers on the price perspective.
To buy luxury brand in Europe and US is an attractive prospect for residents in mainland China. This is because the average price of luxury commodities in China is around 51% more than US and 72% higher than in France. The luxury goods come with a big price tag, import duties are in the range of 10% to 25%, topped with the tax on luxury goods and alcohol that can go up to 60%.