Jan 22, 2013
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Salvatore Ferragamo to raise prices in Europe

Jan 22, 2013

Salvatore Ferragamo is to raise prices in European stores in the next few weeks, following in the footsteps of competitors Prada and the LVMH group. In an interview dated 14 January in the Financial Times, Managing Director of the brand Michele Norsa announced an imminent increase in European prices for goods that are popular with tourists, namely bags and shoes.

Salvatore Ferragamo Autumn-Winter 2012-13.

“LVMH raised their prices by 8%. We will have some low single-digit price increases,” Mr Norsa told the FT at Ferragamo’s headquarters in Florence. This new strategy highlights the importance of the influx of Chinese tourists who benefit from prices up to a third lower in Europe because of taxes. “Those travellers have put pressure on the forecast margins of luxury goods companies by choosing to shop in Europe,” says the Financial Times.

“Salvatore Ferragamo reported slowing sales in China in the third quarter. Analysts have become more cautious about the company’s outlook amid concerns that the brand faces slower growth especially in the main Chinese cities. Its retail sales in China grew 7.7 per cent in the third quarter, a shallower rise than a year ago, while wholesale sales fell 16 per cent. Tourist purchases buoyed Europe and the US where sales grew 16 per cent and 13 per cent respectively”, says the newspaper.

Increasing prices in Europe has become a key strategy for fashion brands since tourists, mainly Chinese tourists, contribute 70% of luxury sales in metropolitan cities in Europe. This wave of tourist clientele has forced the luxury industry to rethink its business model, adapting stores and products to attract rich travelers. If this continues, brands are going to have to abandon the idea of franchising to gain tighter control on store environment in order to ensure impeccable service and an irreproachable image.

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