The gap between the prices for luxury handbags, watches and jewellery in Europe and in China is the biggest it has been for three years, as weakness in the euro upsets global pricing strategies for high-end consumer brands.
Currency swings mean a Chinese consumer would save 39 per cent on luxury goods by flying to Paris instead of buying at home, compared with a saving of 26 per cent last year, according to analysts at Bernstein.
The widening difference has been a headache for watchmakers such as Patek Philippe and fashion house Chanel, which have been forced to risk irritating customers with price changes in an effort to clamp down on the secondary, or “grey”, market in luxury goods.
While greater savings would be a benefit for consumers buying many types of retail goods, in the luxury area they represent a danger that the brand itself is seen as devalued.
“If you increase the price [to deal with currency movements], fine. The customer is relieved and happy to have bought it before the increase. If you decrease it, they feel ripped off,” said Mario Ortelli, an analyst at Bernstein.
Luxury products have historically always been cheaper in Europe than countries such as China, where import taxes increase the cost of goods, encouraging the activities of middlemen who arbitrage between the regions.
However, recent volatility in currency markets has exacerbated the price differential, with a Louis Vuitton Speedy 30 bag now 61 per cent more expensive in China than across mainland western Europe, according to Bernstein.
As of March this year, luxury handbags were on average 45 per cent cheaper in France than in China, compared with just 32 per cent last year, and luxury watches were 33 per cent cheaper, against 21 per cent.
In the same month, the euro fell to a near 12-year low against the dollar on the back of the European Central Bank’s €1.1tn quantitative easing programme.
On Wednesday, Burberry said it had cut prices in China and Hong Kong and raised them in Europe, adding that “recent FX volatility has been a little more extreme” than usual.
Its comments followed price moves from across the luxury sector. In April Chanel cut prices by 20 per cent in China and raised them by 20 per cent where its products are sold in euros.
Swiss luxury brands, such as Patek Philippe, have also been affected by the sudden appreciation of the Swiss franc following the Swiss National Bank’s decision to remove the currency’s cap against the euro in January.