A handbag on display in the Chanel SA shop window at the Avenuel department store operated by Lotte Shopping Co Ltd. in Seoul, South Korea, Tuesday, December 14, 2021.
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According to Morgan Stanley, Koreans are the world’s highest per capita spenders on personal luxury, whether it’s a calf-leather Italian Prada bag or a classic checkered British Burberry trench coat.
An investment bank estimates that South Korea’s total spending on personal luxury goods will grow 24% in 2022 to $16.8 billion, or about $325 per person. According to Morgan Stanley estimates, this is far more than the Chinese and Americans are spending $55 and $280 per person on him, respectively.
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Luxury brands are also highlighting strong sales in South Korea.
moncler Earnings in South Korea said: “More than double” in the second quarter compared to pre-pandemic.Richemont, owner of Cartier, his group, South Korea Double-digit sales growth in 2022compared to both 1 and 2 years ago.
Prada said China’s lockdown contributed to a 7% drop in retail performance in 2022, but the fashion house said the drop was “mitigated by strong performances in South Korea and Southeast Asia.” said.
indicators of financial success
Analysts at Morgan Stanley explained that South Korean buyers’ demand for luxury goods is driven by both increased purchasing power and a desire to show off their social standing.
“Appearance and financial success may resonate with Korean consumers more than most other countries,” analysts wrote in the report.
People at Gucci’s ‘pop-up store’ event in Seoul’s Gangnam district on September 4, 2015
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Displaying wealth is also socially acceptable in Korean society.Ah McKinsey survey Only 22% of South Korean respondents consider flaunting luxury items in bad taste, compared to 45% of Japanese and 38% of Chinese.
Demand for luxury goods was also supported by rising household wealth.Bank of Korea data Household net worth increased by 11% in 2021. almost 76% of Korean household wealth is real estate, the price of which is Significant increase after 2020.
The investment bank also noted that luxury homes are taking advantage of South Korean icons to further drive demand.
Like Fendi and actor Lee Min-ho, Chanel and rapper G-Dragon, “almost all of South Korea’s major celebrities are brand ambassadors for top luxury brands,” the report notes.
Dior has made Blackpink singer Rose the face of its HardWear collection. This fashion her house says has been “extremely well received” and the line’s sales have doubled hers.
However, Bain & Company warns against using the per capita metric for luxury consumption.
“By definition, luxury goods are not mass-market products,” Bain & Co partner Weiwei Xing told CNBC.
“We propose to prorate total spending on luxuries by the number of people in the middle-class and above population,” Xing said, “which provides a more meaningful measure to reflect attitudes and consumption of luxuries. will,” he added, adding that it would narrow the gap.
A customer carries a Chanel SA shopping bag in Seoul, South Korea, Tuesday, December 14, 2021.
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China’s untapped potential
Still, Morgan Stanley said South Korea’s thriving luxury market was a “good preview” of what China’s luxury market could look like, saying China’s luxury market was still “well-penetrated.” Analysts said the two countries shared similarities in their propensity for luxury goods as status markers.
Annual per capita spending on luxury goods in South Korea is now more than six times that of Chinese consumers.
Globally, McKinsey Luxury market to grow between 5% and 10% in 2023driven by demand from the United States and China.
“We expect growth to resume after China recovers from the current Covid wave, which should happen by the first quarter,” Xing said.
