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| People shop at Christian Dior's store at Lotte Department Store in Jamsil, southeastern Seoul, in this 2018 file photo. / Courtesy of Lotte Shopping |
By Kim Jae-heun
The prolonged COVID-19 pandemic has shown the clear contrast between international luxury firms and domestic fashion companies.
Despite price hikes of luxury brands, people formed queues in front of their boutiques while local labels are offering deep discounts but not many are interested.
Both Louis Vuitton and Chanel raised prices for their products here in May. It was the second time for Louis Vuitton which had already changed prices for some items in March, while Chanel had increased its prices by up to 26 percent. But complaints were rarely heard. In fact, people rushed to the boutiques to buy luxury goods before the markups.
The same scene was portrayed in front of Dior's stores in Seoul on July 1, when the news reported the French fashion house will increase prices by 12 percent to 15 percent.
There were three to four times more customers than usual in front of Christian Dior boutiques in Seoul, similar to when people formed long lines before the opening hours when Chanel was rumored to be considering increasing its prices two months ago.
The price for Christian Dior's most popular Lady Dior Medium Bag increased by 12.7 percent to become 700,000 won ($582.99) more expensive. Its other steady-seller Dior Mini Bag was also marked up by 14.6 percent to cost 5.1 million won as of Thursday.
On the same day, domestic firm E-Land's fast fashion brand SPAO announced it would start a clearance sale from Friday offering discounts of up to 79 percent for a total 1,500 items.
Samsung C&T's fast fashion brand 8 seconds started its regular season sale early to sell clothes for discounts up to 60 percent.
Piling up stocks is never good for fashion companies, as it brings down not only sales records but also reflects as loss from valuation of inventory on their financial statements. It turns an operating loss into a net loss.
Furthermore, trends in the industry change so quickly that it becomes hard to sell items when they go out of fashion.
Spring and summer clothes are cheaper than fall or winter season apparel, and falling sales means more deficit during the first and second quarter. Also, COVID-19 has prevented many people from going on holiday, which led to a plunge in sales for vacation-related fashion items.
Many local fashion firms have already executed emergency management as a result of a decrease in sales.
Last month, Samsung C&T's fashion brand Beanpole Sport closed down all its stores nationwide. The fashion firm said its label will only operate an online mall while cutting salaries of its executives. Samsung C&T's fashion business recorded a 31 billion won deficit in the first quarter of this year.
LF also saw a 50.2 percent plunge in its operating profit in the same period and its executives also returned 30 percent of their salary voluntarily.
Another local fashion giant Kolon FnC also saw a 13 billion won loss between January and March and cut its executive salaries by 10 percent.
