"Made in China" Foreign Brand Goods Cost Three Times More in China

"Made in China" Foreign Brand Goods Cost Three Times More in China
Apr 02, 2010 By eChinacities.com

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

***

Related Links:

Top 10 Chinese Cities That Love Luxury Brands the Most
The top recognized fashion brands in China
Top 10 Chinese Cities the Millionaires Choose to Live

 

Warning:The use of any news and articles published on eChinacities.com without written permission from eChinacities.com constitutes copyright infringement, and legal action can be taken.

5 Comments

All comments are subject to moderation by eChinacities.com staff. Because we wish to encourage healthy and productive dialogue we ask that all comments remain polite, free of profanity or name calling, and relevant to the original post and subsequent discussion. Comments will not be deleted because of the viewpoints they express, only if the mode of expression itself is inappropriate.

1

Lee Chong
comment|10310|0

It is pure greed that allows this to continue. When it comes to some things the Chinese are very stupid and selfish.

Jan 06, 2011 16:53 Report Abuse

2

Mark
comment|3118|0

There is an 'aspirational' market for foriegn brands that pushes the price up for luxury items. As for electrical goods, there are no big discounters here pushing down the retail price. Most of the guys in the cyber malls are small traders who are only buying 5-10 units at a time. They are not getting the discounts. This means that in China companies like 'Best Buy' only have to be a little cheaper, as they have no fierce competitors in thier sector.

Apr 09, 2010 04:45 Report Abuse

3

QQ
comment|3085|0

I agree with Frederic. Yes, any foreign brand is expensive here. Maybe because the country economy is still developing, everything coming from foreign countries, especially developed countries shows they are rich.

Apr 06, 2010 04:54 Report Abuse

4

NT
comment|3076|0

I purchased a Toshiba laptop in September 2007 in California for 5,000RMB and two weeks later the same model cost 12,500RMB in a discount house in Nanchang, The difference is the fixed cost of manufacturing in China that is not charged to the foreign purchaser. It takes a computer to produce a mother board and other computer parts to exact specification for electronic products. This production cost is not charged to the foreign consummer. This should be considered illegal trade competition and be taken to the WTC. The wage difference is a factor for cheaper Chinese goods, but the factors of productgion should be included in the foreign export cost of goods.

Apr 05, 2010 17:26 Report Abuse

5

Frederic
comment|3061|0

That's why I try not to buy anything here. You got cheated even in shopping centers. I usually wait for friends or relatives to go to US or Switzerland and bring me back trousers, sportwears, etc. Besides the reasons mentioned above, I also believe that the price problem in China goes along with Chinese mentality of "showing off". Any foreign brand, even those considered very casual in US or in Europe, would certainly raise their prices so that people could boast about the prices they paid for it and make such foreign brand look like a kind of luxury brand.

Apr 03, 2010 05:41 Report Abuse