Sales of luxury products in South Korea

According to a recent report by McKinsey, luxury sales are set to remain resilient in South Korea in the future, as high-end goods are rapidly becoming “part of the fabric of life.”

The country currently accounts for 4% of the luxury sector’s returns worldwide, or approximately 3 billion Euros a year.

The revenues generated by domestic department store chains, the primary channel when it comes to acquiring offerings from firms like LVMH and Hermes, rose by 16.7% in 2008–09, despite the recession

During that period only 5% of wealthy individuals felt guilty about the amount they spent on expensive purchases, measured against 10% to 15% in other developed economies.

Similarly, 5% of the panel suggested “buying luxury goods is a waste of money”, and between 60% and 70% – depending on the category – enjoyed “the functional or emotional value of wearing luxury items”.

Elsewhere, while 45% of Japanese consumers and 38% of their peers in China thought “showing off luxury goods is in bad taste”, this total declined to 22% in South Korea.

With regard to leather and accessories, 18% of the sample had recently traded up to labels carrying a higher price tag, as had 19% for watches and jewellery.

In contrast, a 5% minority had decided to switch to affordable options in these areas.

The fashion segment experienced mixed fortunes, where almost as many shoppers choosing lower cost alternatives than taking the opposite strategy.

In another encouraging sign, around 80% to 90% of “lapsed” customers expressed a desire to splash out on exclusive products.

More specifically, manufacturers may benefit from turning their attention to a younger audience, rather than the traditional target of women in the 40 to 60-year-old demographic.

Ecommerce is gaining in importance, with 40% of respondents having made at least one premium purchase in this way.

Source: McKinsey

by Bernhard Adriaensens – International Consultant in Marketing and Management