Foreign luxury brands are not sold under free market rules in Korea but on their own price fixing, making the country a paradise for retailers of them.
Industry sources said that the luxury brands, such as Louis Vuitton of French fashion house enjoyed double-digit growth of sales in Korea last year amid the financial crisis in Europe and weaker local demand.
Generally, demand goes down when price rise. But strangely enough, when luxury brands raise their prices, more Koreans seek to buy the goods. Even more, the wealthy go out panic buying ahead of mark-up when it is announced.
Lady’s handbag maker Louis Vuitton sold their products worth 497.3 billion won last year, up 16.4 percent a year before, according to tallies available from the distribution community and the Financial Supervisory Service Wednesday. The leading foreign brand here is certain to easily pass the 500 billion won mark in sales this year for the first time in the luxury industry.
Italian brands have showed similar trend in their business in Korea. Fashion shoe maker Salvatore Ferragamo, for example, is estimated to have sold shoes and other luxury goods worth 97.2 billion won last year, up 18 percent from the 82 billion won posted a year earlier. It is expected to join the 100 billion won sales club in Korea this year. The members are currently Louis Vuitton, Gucci and Prada, both from Italy and Burberry of Britain, when jewelers and watchmakers are excluded.
Besides these, Bulgari, Italian jewelry retailer, increased its sales 33 percent from 57.3 billion won to 76.3 billion won. It is quite sure that luxury market has been snowballing as Italian brands are getting popular with Korean consumers. Up to now, Louis Vuitton or Gucci have been regarded as a few of the most attractive brands to Koreans.
But Gucci, one of the favorite luxury brands of Koreans, was not happy as it was the only foreign brand recording a single digit sales growth last year. It sold 295.9 billion won worth in 2011, up 8 percent year-on. It seems that the high-income class turned their back on the brand as it distributed goods to more outlet shops which sell them cheaper.
Many brands have already raised their prices once or twice but high demand won’t subside, fashion industry sources said.
“The luxury goods market seems not to be affected much by low consumer sentiment caused by high inflation but the market is expected to sustain its share thanks to growing demand from middle income class,” said a spokeswoman of Lotte Department Store in eastern Seoul. “Clothing, jewelry or watches are popular with the rich and upper-middle class looking for entry items such as mid to low price bags.”