Handbags displayed in the window of a Chanel SA store at the Avenuel department store, operated by Lotte Shopping Co Ltd., in Seoul, South Korea, Tuesday, December 14, 2021.
Seong Joon Cho | Bloomberg | Getty’s paintings
Whether it’s Italian Prada calfskin bags or classic British check Burberry trench coats, South Koreans spend the most in the world on personal luxury goods per capita, said Morgan Stanley.
The investment bank estimated that South Korea’s total spending on personal luxury goods rose 24% in 2022 to $16.8 billion, or about $325 per capita. In keeping with Morgan Stanley’s estimates, that is significantly greater than the $55 and $280 per capita spent by Chinese and Americans, respectively.
Luxury brands also highlighted good sales in Korea.
Moncler said its revenues in South Korea “over twice” in the second quarter in comparison with the pre-pandemic period. Richemont Group, owner of Cartier, said Korea is certainly one of the regions where sales increased in double digits in 2022in comparison with each a yr and two years ago.
While Prada said lockdowns in China contributed to a 7% decline in retail sales in 2022, the fashion house said the decline was “mitigated by strong performance in Korea and Southeast Asia.”
Financial success markers
Morgan Stanley analysts explained that the demand for luxury goods amongst South Korean buyers is driven by each the increase in purchasing power and the desire to externally display social standing.
“Appearance and financial success may appeal more to consumers in South Korea than in most other countries,” analysts wrote in the report.
People attend a Gucci “pop-up store” event in Seoul’s Gangnam district on September 4, 2015.
Ed Jones | afp | Getty’s paintings
Shows of wealth are also more socially acceptable in Korean society. AND McKinsey Poll found that only 22% of Korean respondents thought it was in bad taste to indicate off luxury goods, in comparison with 45% of Japanese and 38% of Chinese.
The demand for luxury goods was also supported by the growing wealth of households. Bank of Korea data shows country data household net value increased by 11% in 2021. ABOUT 76% of household wealth in Korea is in real estate whose prices have has increased significantly since 2020.
The investment bank also noted that luxury homes have used Korean icons to further catalyze demand.
“Just about all major Korean celebrities are ambassadors for leading luxury brands,” the report said, as did Fendi and actor Lee Min-Ho, and Chanel and rapper G-Dragon.
Dior made singer Blackpink Rose the face of its HardWear collection, which the fashion house said was “thoroughly received” and doubled the line’s sales.
Nevertheless, Bain & Company cautions against using per capita ratios to devour luxury goods.
“Luxury by definition isn’t a mass product,” Bain & Co partner Weiwei Xing told CNBC.
“I might suggest a proportional proportion of total luxury spending to middle and upper-class population, which could be a more meaningful metric reflecting attitudes and consumption towards luxury,” Xing said, adding that this could narrow the gap.
A customer carries a Chanel SA shopping bag in Seoul, South Korea, Tuesday, December 14, 2021.
Bloomberg | Bloomberg | Getty’s paintings
Untapped potential in China
Still, Morgan Stanley said the thriving Korean luxury goods market is a “good portent” of what the Chinese luxury goods market could turn into, which it says stays “under-penetrated.” Analysts said the two countries have similar approaches to luxury items as indicators of status.
Currently, South Korea’s annual per capita spending on luxury goods stays greater than six times that of China.
Globally McKinsey predicted the luxury goods market is anticipated 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 waves, which needs to be by the first quarter,” Xing said.