Estee Lauder announces mainland price cuts following government’s import tariff reduction

By Yang Jing Source:Global Times Published: 2015-5-28 0:18:02

French cosmetics group The Estee Lauder Companies Inc announced a price-cut plan in the Chinese mainland market on Wednesday as a form of "support" for the Chinese government's import tariff reduction on Monday.

The import tariff cut will have a limited impact on retail prices but the company supports the change and believes the new policy will help boost domestic consumption in the future, a customer service staff of Estee Lauder who declined to be named told the Global Times on Wednesday.

"But there are no further details about how much the price cuts will be or when it will be carried out," she said.

Estee Lauder has a group of well-known skin-care brands.

Another cosmetics giant,  French company L'Oreal SA,  also announced on Tuesday it would cut prices of its imported products in China, according to a statement the company sent to the Global Times on Wednesday.

"We welcome the Chinese government's decision to lower custom duties on imported skin-care products from 5 percent to 2 percent," L'Oreal's statement said.

The Ministry of Finance (MOF) announced on Monday it would reduce import tariffs on certain consumer goods from June, as part of efforts to boost domestic consumption and stabilize economic growth.

From June 1, the import tariff rates on some consumer goods including skin-care products, suits, shoes and diapers will be reduced by an average of more than 50 percent, according to a statement on the MOF website.

The State Council, China's cabinet, announced on April 28 it would start import tariff cuts and carry out reforms on consumption taxes.

"The government's quick move indicates its determination to attract Chinese consumers back to the domestic market," Zhou Ting, director of Fortune Character, a Shanghai-based luxury brand consulting firm, told the Global Times on Wednesday.

Chinese consumers have complained about paying higher prices for products than people in other markets.

Luxury consumers in China pay about 20 percent more than counterparts in Europe, Reuters reported on Tuesday.

The price gap pushed more Chinese customers to purchase overseas which caused sales slumps for almost all luxury brands in China last year and heavy inventory currently, Zhou said, noting that is why some brands are providing big discounts in China.

Italian luxury brand Gucci launched sales in several Chinese cities including Hong Kong and Shanghai on Saturday with discounts as high as 50 percent off, Shanghai local news portal reported on Wednesday.

The tariff cut may encourage more companies to make price adjustments in China but it will not cause a significant price drop because import duties account for only a small part of the high prices of luxury goods and the consumer tax is more vital, according to Zhou.

Gucci did not reply to the Global Times by press time about whether it will continue to provide discounts in China due to the import tariff cut.

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