‘Grey market’ fears for leathergoods brands in China
13/08/2015
Brands have already confessed to have been affected by China’s clampdown on gift-giving, and the latest currency move will effectively make goods more expensive in China than overseas.
This has already led to a lot of tourist shopping – Chinese buying leathergoods when they visit Europe, for instance. More than half of sales made to China’s luxury consumers happen outside of greater China, according to bank Morgan Stanley.
But has also led to a rise in the ‘grey market’, where agents buy quantities of handbags in Europe and sell them in China for a discount to their retail price there, while still making a large profit.
The latest move could increase activity in the grey markets, which some estimate to make up 20% of business, and hurt the luxury brands. Salvatore Ferragamo, Louis Vuitton and Tod’s were among companies whose share prices fell on the news.
China devalued its currency by 2% on Tuesday, by another 1% yesterday and another 1% today, in an effort to boost exports and push economic reforms.
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