Cosmetic giants deal with pricing gap – Ben Cavender

One of the main reasons Chinese consumers buy themselves silly abroad – including Hong Kong – is the high difference in pricing of similar products in mainland China. Cosmetic giants Estee Lauder and AmorePacific have lower their prices up to 30 percent, as also the government is revamping its import fees. More will follow, tells retail analyst Ben Cavender to the South China Morning Post.

The South China Morning Post:

“These global cosmetics names are now narrowing the price gap between China and overseas, and we believe more are probably about to follow suit,” said Ben Cavender, director with the China Market Research Group.

“The fact that western brands are becoming cheaper in the mainland may also discourage people from travelling to Hong Kong to make purchases,” he added.

Imported cosmetics used to face tariffs of 84 per cent, reflecting both import and point of sales taxes.

But the tariffs have now gone down to 29 per cent for most beauty products thanks to policies introduced in 2016 designed to boost domestic consumer spending…

With incomes rising, Chinese shoppers have become one of the largest single markets for western consumer brands.

Prior to the tariff reduction, the significant price premium on foreign goods in China saw many mainland consumers shop via cross-border online marketplaces or while travelling abroad.

Analysts said that stiff competition from rival brands and a weakening yuan might take some of the sparkle off the Chinese market for international cosmetics groups in spite of the price cuts.

Over the last two years, AmorePacific has pushed ahead with its strategy to make inroads into China, competing head to head with established international players such as Estee Lauder.

“The market is competitive and the rise of South Korean brands are posing a challenge to the rest of the players in China,” said Cavender.