There are some great clothing shops in Kunming - such as ZUCHUG, Exception de Mixmind, EIN, Original..... these shops are quite pricey and are ALWAYS empty of paying shoppers. Not too many people can shop there because the merchandise is very expensive. In my past experience I have never seen these stores have sales. Neither seasonal sales or holiday sales. Why don't these stores have sales? What happens to all the unsold goods? Can Chinese firms really refuse to markdown merchandise to maintain their brand/image? I'm no marketing guru, but such arrangement seem hardly efficient.....

Hi end brands rarely do sales. It devalues the brand. If they did have sales they would have even fewer regular paying customers and savvy shoppers would just wait for the sale.
In an aspirational market the high status shoppers don't worry about the price. Honestly they don't, there is a cachet in being seen with some brands that is worth more than the item for many poseurs.
Some of these luxury brands are 3x the price here that they are in Europe. They are really leveraging the brand value to its limits, it is how luxury brands work. This is why one of my students just spent HKD100 000 on luxury brands when she went to HK. She really does not need the stuff, nor have to worry about the money, but HK offers a 'bargain', and who can resist a bargain.

last time I was in HK, I noticed long line-ups outside stores like Chanel. shopping is really serious stuff in HK.

"quite pricey and are ALWAYS empty of paying shoppers"

At the price their items are purchased, only one or two items sold could be enough to pay for the month's rent. My girlfriend's younger brother spent 10,000rmb on a man purse at a shop on Nanping jie. A purse. For men...

@Magnifico, are you sure those weren't Mainlanders?

yeah, that would make sense. mainlanders making shopping sprees in HK for stuff they can't get. I found it odd to see so many people lining up. yep, you're probably right.

As for the items never being "on sale" Tiger Tiger has the proper concept, the brand doesn't want to be associated with discounts, it respects it's few "high end" customers.
Expanding this concept to the shopping mall level I suspect the shopping mall owns certain individual retail stores, therefore a specific "crown jewel" or "high end" retail store could afford to loose money. It's a small loss for the shopping mall owners to have this prestige store in it's hallway, embellishing it's status.

Thanks for your thoughts everyone! Very interesting. I am curious then what happens to the unsold goods once one season is over and new merchandise arrives. Where does the unsold stuff end up?

I just Googled images of Exception de Mixmind, and by the looks of them, those things won't go out of fashion before 2075.

New season items will come in with a higher price tag. Nothing is ever labeled reduced. There may be some price tinkering, to make a product seem more affordable than others on display, but it would not be advertised or labelled as a reduction.
I suspect the case where items simply don't sell at all would be extremely rare and items would perhaps be returned to the manufacturer. Maybe for shipping to a new market, or for disposal/destruction, and this would never be admitted by the manufacturer.
In Europe some of the big name stores have put a limit on the number of items that Asians can buy in one visit. Because the price differential (up to 300%) people are just buying anything to take home and make a profit selling on to others. With that in mind it is possible that nothing ever goes unsold.