Changing psychology of consumers

BEIJING - When it comes to luxury goods, Chinese consumers are now more price-sensitive than in the early days when luxury stores were new to the mainland.

"They now make themselves heard and do not hold back their complaints when it comes to dissatisfaction with the prices, product quality and after sales services," observed Zhou Ting, executive director of the Research Center for Luxury Goods and Services at University of International Business and Economics.

But the luxury brands have stuck to their old mindsets and neglected the changing psychology of China's consumers, she said.

The most obvious bone of contention is the price. Chinese consumers are now aware of the massive price gap between luxury items sold on the Chinese mainland and elsewhere in the world.

For the same luxury items, ranging from watches, luggage, clothes, wine and electronic goods, the prices can be up to 51 percent more expensive in China than the United States and 71 percent more than in France, according to the statistics from the Ministry of Commerce.

"I have been tempted by luxury items on the mainland, but I have never bought any," said Candy Wan, a typical white-collar worker in Beijing, who spent 4,000 yuan ($632) on a French brand purse in Hong Kong in December. Wan said she had waited months before acquiring the item, as it is 2,000 yuan more expensive in Beijing.

Between 15 and 25 percent of the price of a luxury item is a special tax on imported luxury goods imposed by the Chinese authorities. The luxury brands claim this is the main reason for higher prices of luxury goods in China, but this might not be the case.

The profit margin is so large in China that market observers have begun to suspect luxury brands of price discrimination against Chinese consumers. It is believed that the world's leading luxury brands make profits of more than $1 billion a year from Chinese consumers alone.

"The tax on luxury goods has become an excuse for the price discrimination of luxury brands," said Ouyang Kun, chief executive officer of the World Luxury Association's China office. "The brands still feel their goods are superior on the Chinese market, so the prices must be higher to show their prestige. But that was years ago. Now, they are wrong," added Ouyang.

However, analysts believe Chinese consumers are becoming more discriminatory when it comes to luxury goods as the country's luxury market matures and the brands will have to respond to this if they want to succeed in China.