In a move already made by Louis Vuitton and some other fashion houses, Luxottica has decided to harmonize its prices globally, aligning them with those charged in Europe. China, and to the a lesser extent the U.S., will be the markets most affected by this program, as they will see prices declining, especially at the high end of the group's portfolio, in the coming six months.
Due the globalization of the world economy and the growing importance of e-commerce, the company estimates that it is important that its products remain “within a pricing corridor” worldwide. Items can have “reasonable” pricing differences, determined by duties and logistics, but “dramatic” discrepancies are no longer justified in a global marketplace, according to the group's joint chief executive in charge of markets, Adil Mehboob-Khan.
He reckons that it takes courage to cut prices but the moment is right to do so because of the recent surge of the dollar and the renminbi against the euro. Any negative impact from the price reduction is expected to be offset by the strong growth the company is enjoying in China. Mehboob-Khan expects the price adjustment to further underpin demand in the country, where sales are already growing by about 40 percent.
He noted that, unlike some luxury goods companies, Luxottica has not cut prices in some markets to increase them in others. The policy is to align the price tags of the most expensive items with those in euros. Vuitton and other luxury brands are readjusting their prices in China in reaction to strong purchases by Chinese tourists at their own European stores, but because of taxes and other reasons, there is still a price gap of around 30 percent for them between China and Europe.
The price adjustments will apply to models presented by Luxottica in July and available from October and November. The financial impact of the move is not expected to be seen before 2016.