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November 17th, 2009 
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Back to the Deluxe book I’m crazy about. Almost done, but I have to write a blog about it before my ADHD kicks in and I completely forget.
I know MANY luxury goods are manufactured in China, but even so I ignored it and didn’t really think about it. The book made a clear point about it that really stuck to me. Read the excerpt from below…
pg 203: “The luxury brands are fiercely protective of the logo and only send the number of labels needed for the amount of bags in each order. “If that label turns up on other bags, the logo is worthless.” Few bags actually carry the “Made in China” label. If they do, it is hidden. For one bag, the tag was sewn into the bottom seam of the inside pocket. For another, it was stamped on the reverse side of a postage stamp size leather flap that bears the brand’s logo. You need a magnifying glass to read it. The majority, however carry a “made in Italy, France or UK” label. The brands have little tricks to get around the china label. Another bag has the entire bag made in China except for the handle. The bag is shipped to Italy, where the Italian-made handle is attached. Some brands have the tops of shoes-the most labor intensive part of the process- made in china and then attach the soles in Italy. These items can carry the “Made in Italy” label.
pg 204: “Production in China costs 30-40% less than in Italy. “So we aren’t dirt cheap,” the manufacturer said. “There is a reconception in the US and Europe that if the brands move to China they’ll get it for 10%. Sure, there are factories that will do that, but the quality won’t be there and the brand will suffer….In the end, we are the money generator for them.”
The author then states… “I met some friends at the new Harvey Nichols store in Hong Kong and I passed through the handbag department. To my right on the shelf, sat the exact same bag I saw the Chinese girls making in the factory. It cost the brand $120 to produce. It was for sale at Harvey Nick’s for $1,200.”
Ouch. Either the consumer is ignorant or in denial. I’m not judging nor am I scrutinizing the major luxury labels or the consumer, but I think it’s something that should be taken into consideration for the sake of consumerism.
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Yes, I have heard of this practice. It’s quite similar to how cars are manufactured as well — parts made from all over the place, but it gives them more wiggle room over being able to say where the car was made. I understand and accept we are in a global market and our goods come from everywhere, but it gets trickier when we don’t have full transparency over the specifics of where our products come from.
Nice detective work. It’s amazing how much is made in China, and how much it’s marked up. Still, if there’s an economic demand curve at $1200, they’ll get away with it. It makes you wonder how much the bag is worth.
(focusing specifically on the statement “It cost the brand $120 to produce. It was for sale at Harvey Nick’s for $1,200.”)
I wrote about the book “Cheap: The High Cost of Discount Culture” on Bonne Vie a few weeks back. They made an excellent point with mattresses that I believe also extends to luxury items – When it comes to that kind of good (a mattress, or a luxury bag), the only frame of reference we have is based on price. The MSRP doesn’t accurately tell you the cost of production, or the insane markup that item might have, only a reflection of the amount people are wiling to pay for it.
Nothing wrong with globalization… the problem is trying to be sneaky with consumersss… :(
Yea its CRAZYYY
There’s a reason Coach runs with gross margins over 70%, and you just found it.
Yes, it’s quite unfortunate :(