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Labels GST and How It Affects The Luxury Goods Industry in Malaysia

GST and How It Affects The Luxury Goods Industry in Malaysia



April is just round the corner, and I'm sure everyone is stressing about the upcoming GST implementation and how that's going to affect not just manufacturers, suppliers, entrepreneurs, retailers, but most importantly, consumers.



I, for one, wasn't too pleased because  with the annual (sometimes bi-annual for some brands) price increase and GST on top of that, it looked as if it was going to burn a gaping hole through our pockets. Friends have also been experiencing what I call luxury shopping fever, with everyone scrambling to make their purchases (mostly bags, lol!) before April 1.


 I did some research of my own, and asked some of the luxury brands' reps, and this is what I've been told. Do note that in most of the cases, due to confidentiality purposes, I shan't be naming the brands. That said, different brands have different approaches to the implementation of the GST, so here are the various scenarios that would be happening, come April.





Chanel

I'm only naming Chanel because I'm sure that all of us have, in some capacity or another, heard about the global "harmonisation" of prices on classic pieces like the Classic Flap, 2.55, and Boy Chanel, as a strategic effort to combat reselling. Our regional neighbours have already put this into effect. In Singapore, according to Bagaholicboy, the prices of Classic Flap and 2.55 bags have been lowered to SGD 6660 (previously SGD 7,550), while the Boy has been reduced to SGD 5,820 (formerly SGD 6,580). In Hong Kong, the Classic Flap  went from HKD43,200 to HKD34,000. Now what about Malaysia? According to Chanel, they would not be reducing prices over here because we already comparatively cheaper than HK and SG before the harmonisation. There is therefore no need to adjust the prices.


However, how effective do you think this "harmonisation" would be? Because even if we shop overseas, we are still entitled to VAT/GST refund, not to mention the fluctuating exchange rates would still result in the bags being cheaper elsewhere. What are your thoughts on this?



As for the other brands, either of this would be happening (Again, sorry I can't name the brands!):



  • There would not be a price adjustment, but an additional 6% sales tax would apply. And yes the annual (or bi-annual) price increase would still apply. But fret not, you wouldn't be getting a shock with GST on top of the price increase because the brand has already done the price increase earlier this year, so probably the only pinch you'll be feeling now, is the 6% extra.

  • There will not be a price increase and the retail price wouldn't be affected because the GST would be absorbed by the brand instead. What the brand would do is adjust their cost price on their end, so that the retail price remains as is, pre-GST. So for example, if the retail price is say RM2,000 currently before GST, the post-GST price would remain as RM 2,000 (GST inclusive). Hence, although you may see a 6% GST being charged to your bill, the total amount you pay is still RM 2,000. 

  • Brand has already increased their prices earlier this year, with GST already in mind, so again, no big changes to retail price. 


  • Other brands couldn't comment as they still haven't received the full list of price updates.  


 What are your thoughts on these different brand strategies? Of course, my favourite approach is the 2nd one!


Toodles!  Hope all of you found this helpful! :)