Made in China” brands/products and their different prices in China and in the U.S.

Brand	Costs in China		Costs in U.S.
	Franchise Houses	Other Stores	Malls	Discount Stores
Levi's jeans	700 RMB and up	100 – 400 RMB	30 - 40 USD	15 -30 USD
ECCO shoes	1000 RMB and up	500 RMB and up	60 – 100 USD	40 -60 USD
Coach bags	4000 RMB and up	2000 RMB and up	200 – 300 USD	150 – 200 USD
Nike sneakers	668 RMB		32.99 USD
Marlboro cigarettes	150 RMB/carton		35 USD/carton
Armani suits	30,000 RMB		1000 USD
Italian dress shoes	1500 RMB		50 USD
Cashmere sweaters	1000 RMB		100 USD
HP Pavilion DV4i laptop	8000 RMB		800 USD

1 USD = 6.8267 RMB

This Spring Festival break, thousands of Chinese tourists hit upscale boutiques and retail stores dotting along Fifth Avenue in New York City. And many of these Chinese tourists had a special preference for “made in China” foreign brands, including luxury goods, name-brand clothes and big-brand sneakers. The Chinese Lunar New Year became a sort of “golden week” for NYC and brought on a new holiday boom to New York retailers. According to research done by the US Department of Commerce, 90% of Chinese tourists came to NYC to shop.

More and more foreign luxury brands are quick to realize the big potential of the Chinese consumer market and the chance to fully exploit the cheap labor available in the country; big brand clothing and jewelry companies outsourced the manufacture of their products to sweat shops in China and then slapped on the shiny labels and have these goods shipped to upscale markets all across the globe.

While it should be logical then that goods “made in China” should be the least expensive for consumers in China, as you can tell from the table set forth at the beginning of the article, this is not the case at all. You can get a pair of Levi's jeans for 15 to 30 USD (100 -200 RMB) in a discount store in the U.S., and yet you'd have to pay at least 700 RMB for the same pair of jeans in China. Exported goods were sold for a third or a fourth of the retail price in China overseas. Why is this case?

1) A few foreign brands are monopolizing the Chinese market

China may be the largest manufacturer in the world, but the brands and products being manufactured are owned by foreign companies, and these companies set the market prices, not the manufacturer. And also there is a healthy competition in the overseas markets for foreign brands and this is lacking in the Chinese market. When there is a monopoly, the prices are inevitably higher for lack of competition. And high import tariffs, huge cost and effort to build and nurture a market from the ground up, coupled with a lack of anti-trust regulations in place, are all the reasons making it hard for more foreign brands to enter the Chinese market.

2) High distribution and marketing costs for selling goods intended for export in the domestic market

Even though many Chinese companies that are contracted for manufacture and processing of goods for export do complain about the low profit margin (usually only 5-6%), but the high distribution and marketing costs of turning these goods for sale in the domestic market are also an insurmountable reality – at least for the time being. Companies in the overseas markets all have mature sourcing teams and agents in place to negotiate with the suppliers for better and uniform deals and prices. On the other hand, only a handful of companies in China have sourcing teams and agents in place to negotiate long-term business with suppliers. And also for the lack of a better credit system in China, suppliers are expected to shoulder the production cost first and get paid later; foreign contracts on the other hand are a pure matter of delivering the goods for payment, with no added burden of distribution and marketing. So even considering the low profit margin, suppliers are better off manufacturing goods for export rather than turning them over for sale in the domestic market.

3) Chinese wealthy can afford to pay

Foreign name brand users in China are mostly middle and upper class city dwellers and white collars. Even if the companies can cut back costs by doing away with brick-and-mortar shops and sell their products online, consumer demography and market share will still remain the same; and most of these customers can afford and would prefer to pay the added cost of being able to shop in a boutique and specialty shop.

Source: gcpnews.com

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