There are many excellent reasons for cross-border luxury shopping. Depending upon the market, these issues come down to authenticity, price, and/or choice of goods.
Authenticity drives much of the cross-border shopping in Asia and Latin America. For people living in the West, the grey market often brings up images of taking a risk on low-quality knock-offs. But, in large parts of the world, the opposite is true. Counterfeiting of luxury goods is so widespread in China and Southeast Asia that the chance of buying a fake is considered to be much lower if the products come from legitimate outlets overseas.
However, fakes are a global problem for luxury retailers. In the European Union, €26.3 billion euros (about $27.7 billion) of counterfeit clothing, footwear, and accessories are sold, according to official EU statistics. That’s equivalent to nearly 10 percent of total sales. In many cases, the quality of the fakes is so good that many consumers think they are getting the real merchandise. (Business of Fashion)
Price can be a factor because import tariffs, national taxes, and currency valuation spreads can make local prices so much higher than cross-border items that it is economical to travel to another country for a large luxury purchase. To counter this, companies like Chanel, LVMH, TAG Heuer, and Patek Philippe cut prices in China to reduce the grey market of imports due to import costs. In some other countries, prices are higher due to the costs of running a retail operation in those countries. The Nordic countries and Australia/N.Z. are examples where domestic costs drive higher prices when compared to buying overseas.
The lack of product variety is an important factor in some markets. Shoppers in Mexico, India, and Canada are examples of countries where shoppers are particularly likely to across borders to find a broader choice of goods than what is available locally.
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