Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Louis Vuitton losing luster in Korea
This is the fifth in a series highlighting operations of foreign luxury brands in Korea. ― ED.
By Park Jae-hyuk
Louis Vuitton CEO Michael Burke
By Park Jae-hyuk
Louis Vuitton became highly popular with young Korean women a few years ago for its “relatively” low prices compared to two other top luxury brands ― Hermes and Chanel. However, the popularity of the global fashion house seems to be fading.
According to industry officials, Tuesday, Louis Vuitton’s sales growth has been decreasing at major department stores in Korea for years. Its sales even contracted at a department store last year, while Hermes and Chanel chalked up a double-digit growth at the same store.
The company’s representative also admitted that some of its sales channels face setbacks although specific figures are not disclosed.
“Although Louis Vuitton saw its sales go down at some outlets, its overall sales still increased last year,” said a spokeswoman of Wellcom Associates, a PR agent for Louis Vuitton Korea.
Louis Vuitton Korea had enjoyed double-digit growth in sales until six years ago. Thanks to the popularity, the luxury brand has exerted its influence on the nation’s leading retailers, especially those who operate duty free shops.
For example, Dongwha Duty Free Shop is having a hard time because of a rumor that its outlet will be up for sale, after Louis Vuitton withdrew last December from the country’s first downtown duty free outlet for the first time in 26 years.
Hyundai Department Store faced a backlash last November as well, for claiming Louis Vuitton would open a shop at its envisioned duty free store, which was dismissed later by the sales agent for the brand.
Also, owners and CEOs of Korea’s retail giants lined up to meet Chairman Bernard Arnault of LVMH, parent company of Louis Vuitton, during his visit to Korea last year. The spokeswoman said that the global head office decides whether to open or close shops at duty free stores here.
Louis Vuitton’s influence over the local retailers, however, may decline in the near future, as fewer consumers appear to be willing to pay big money to buy its products.
Korean consumers dubbed its bags “three-second-bags,” saying they are seen in the street every three seconds. From their perspective, the brand is too common to be cool.
Some people attributed the fading popularity of the brand to a massive amount of imitations in the market.
But the company’s poor after-sales service and pricing policies are also mentioned as reasons.
According to the spokeswoman, Louis Vuitton’s leather bags can be repaired for almost the same cost as buying a new bag. Plus, the prices of its bags have gone up about 7 percent every year.
In addition, Louis Vuitton Korea has been criticized for avoiding posting the amount of its donations, since it became a limited liability company in late 2012 so that it does not have to disclose its income statement and balance sheet.
However, the spokeswoman countered, “Louis Vuitton Korea donated $380,000 to UNICEF last year, and the Korean branch spent the third-largest sum of money among branches worldwide.”
The spokeswoman refused to disclose the ratio of donations to operating profits. Before the company became a limited liability company, the figure was below 0.5 percent, while 2 percent is the average among top 500 firms in Korea.
Founded in 1854 by Louis Vuitton in Paris, Louis Vuitton has become one of the world’s leading international fashion houses, specializing in leather goods, watches and accessories.