Oct 12, 2018 (China Knowledge) - News of Chinese travelers being slapped with custom duties for luxury products purchased overseas have been circulating on popular Chinese social medias such as WeChat and Weibo.
Fears of slowdown and fall in demand by Chinese consumers has fueled the biggest monthly selloff in LVMH <EPA:MC> shares since 2015, with LVMH confirming the speculation as reported by Bloomberg. Shares price of LVMH closed at EUR 261.95, down 1.26% yesterday, despite the good quarterly financial report.
According to a report by McKinsey, Chinese luxury consumers represent an RMB 1 trillion opportunity with them accounting for two-thirds of the luxury’s market growth.
The crackdown has forced consumers to be more careful in their luxury products purchased overseas to reduce the chances of having to pay custom duties upon returning to China. Besides LVMH, other luxury brands have also been feeling the impact of more stringent law enforcement at the border.
Shares price of Kering <KER:EPA> has fallen by 2.36%, closing at EUR 372.30. Kering is the company behind well-known brand such as Gucci, Saint Laurent and Alexander McQueen.
These brands will have to rethink of their marketing strategy to ensure that this huge market potential can be continuously reaped in, boosting the companies’ profits.
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