[SHANGHAI] L'Oreal SA will reduce prices of most of its imported products in China to boost domestic sales, the French cosmetics giant said on Tuesday, after China said a day earlier it will cut import tariffs on goods, including skincare products.
China announced on Monday a reduction in import tariffs on consumer goods, including skincare products, some Western-style apparel and diapers from June 1, potentially giving a fillip to global brands and bolstering domestic consumption amid faltering economic growth. "We have decided to actively respond to this decision by lowering the prices of most of our imported products, as we believe it will encourage domestic consumption," L'Oreal said in a statement sent to Reuters.
The Ministry of Finance said it will lower import taxes by an average of over 50 per cent as an "important measure to create stable growth and push forward structural reform", following a call by China's cabinet to help stoke domestic spending at a time when record numbers of cash-rich Chinese tourists are splurging overseas.
L'Oreal is the market leader in China's US$25 billion skincare sector which is set to grow to US$35 billion by 2019, according to market researcher Euromonitor. L'Oreal held 13 per cent of the market last year, ahead of Japan's Shiseido Co Ltd and Olay-owner Procter & Gamble Co.
The French company said it welcomed the decision by China's government to lower custom duties on imported skincare products to 2 per cent from 5 per cent, although it added that lower customs duties generally have "limited impact on retail price".
Chinese consumers often grumble about paying higher prices for goods than in other markets, partly due to steep import taxes. Analysts say consumers in China pay around 20 per cent more for luxury goods than their counterparts in Europe.
French fashion house Chanel cut prices in China in March to counter the decline of the euro and discourage customers from buying fakes.