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B2C platforms bring luxury, controversy

Updated: 2012-03-17 11:19


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SHENZHEN -- China's online retailers are now providing cheaper access to foreign luxury products than ever before. However, some businesses operating in the sector have had to face criticism from the very brands they carry.

Gucci, Swarovski and other luxury brands recently claimed that several Chinese business-to-customer (B2C) retailers, including the well-known Tmall, 360buy and Dangdang, are not authorized to sell their products online.

"We receive our goods from overseas distributors. All of the luxury items we sell are genuine," said a 360buy customer service representative when asked about the source of their products.

Online retailers have seen booming sales of luxury goods, largely because they sell them for far lower prices than China's brick-and-mortar stores. A small Swarovski pendant can be purchased on 360buy for 450 yuan ($71), or sixty percent of the 720-yuan price tag typically seen in stores.

However, it is the low prices that have attracted attention to these companies. Swarovski recently announced that it has the right to take legal action against Chinese online retailers if they are found to be selling products illegally in China.

"High-end brands are strict and organized in the way they administer their authorization," said an employee of a Shenzhen-based luxury B2C retailer who identified herself as Zhao Ting.

Zhao said few of China's online retailers have received authorization for the direct purchase and sale of luxury goods.

Since prices for luxury goods are often lower in other countries, some Chinese companies obtain their merchandise through "professional purchasing agents," or people who travel to other countries to purchase the items at a lower cost before bringing them back to China, Zhao said.

Even after deducting the cost of purchasing, shipping and paying duties on the goods, purchasing goods in this way can still be profitable for Chinese companies, especially if they are purchased at a discount, Zhao said.

Express shipping has also provided another way for Chinese companies to skirt customs regulations and obtain their merchandise. These companies use tax-included express mail to bring products in from overseas by purposely failing to properly declare luxury goods so they can be shipped overseas for the cost of their weight alone.

In addition, some logistics companies offer to bring the goods into the country by hiding them in vehicles.

Cases of smuggling via express shipping and other methods have been cracked down on, according to an official from the customs bureau of South China's city of Guangzhou.

Express shipping is often required for luxury goods that are imported into the country, assuming those goods are declared in accordance with regulations, said the official, who requested anonymity.

However, since just a single invoice is often issued for large batches of express-shipped goods, it can be difficult or impossible to find individual invoices for import tariffs or value-added taxes, the official said.

Several luxury goods manufacturers have informed their customers that they will not offer after-sale services for goods purchased from unauthorized online retailers in China.

"Customers will not be protected if they buy luxury goods through unauthorized channels. Strictly speaking, any imported goods that lack government approval are unqualified products," said Jiang Liehua, deputy secretary-general of the Guangdong Customer Association.