A recent study claims that in China’s preeminent e-commerce industry, the gray market, which offers brand-new, genuine goods at deep prices, is progressively outstripping the official sales channels of some international luxury brands.
Sales for some of the most popular products from luxury outdoor wear brands Moncler and Canada Goose were 2.5 to 15 times higher on Dewu, China’s largest gray market platform, than in their official stores on e-commerce platform Tmall during the peak shopping season from October to March, according to a report released on Tuesday by data consultancy Re-Hub.
Powerhouses from LVMH to Kering SA are seeing a decline in their share values due to the increasing popularity of Dewu, which is putting pressure on their profit margins. Customers are essentially purchasing luxury goods at deep discounts from overseas by shopping in the country’s parallel market, eschewing the domestic channels that businesses have extensively spent in creating and sustaining.
The Tmall numbers are net of returns and cancellations, whereas Re-Hub does not account for them in its Dewu sales figures.
Due to the country’s economic downturn and collapsed real estate market, China’s middle-class customers are finding these kinds of deals more and more alluring.
costs on Dewu were significantly less for certain commodities than official costs in France and Japan, suggesting that price arbitrage during travel to benefit from depreciating currencies and reduced taxes is only one aspect of China’s growing gray market. According to Re-Hub’s analysis, deepening discounts may arise from brands gradually raising their official prices or from resellers having direct access to brands’ distribution networks, which enables them to offer lower prices.
The research cited anecdotal evidence to support its claim that certain brands have taken action to halt the gray market’s expansion. According to Re-Hub, certain companies, like Louis Vuitton, have systems in place to identify specific dealers in stores and to ban them as customers. Tightening wholesale channels and tracking the movement of goods into China are two more steps.
