Humiliation of Luxury Brands
Korea’s designer brand industry (8.3 billion euros, US$11.3 bllion) ranks third in Asia, although the prospects for traditional high-end designer brands like Louis Vuitton is bleak. These circumstances originate from the market’s main consumers, young people, whose recent preferences are contemporary brands over higher-end brands.
A term derived from the fashion industry, “contemporary brand” refers to trend-leader brands offering a reasonable price range, with unique and higher-quality design compared to regular brands. Goods with unique and classy design compared to traditional yet expensive high-end brands attract young Korean consumers who prefer a trendy yet practical consumer lifestyle.
With keen interest, the Financial Times (FT) introduced Korea’s rapid advance in contemporary brands as a force that is enough to hustle out Louis Vuitton’s towering reputation of selling one product every three seconds.
Song Ji-hye of Bain & Company, a global consulting firm, said, “Although steep-priced designer brands such as Chanel and Hermes still score high in sales, some popular designer brands are taking hard knocks trying to keep up with current fashion trends, as contemporary brands obtain a growing number of consumers.” She added, “S. Korea’s designer brand industry is going through a major transition.”
S. Korea’s prudent consumer trend in luxury goods is adding pressure for global designer brands. This implies that Korean consumers purchase designer brands online or in outlets at a discounted rate, rather than at the original price in department stores or independent shops.
A cross merchandiser (CMD) of Lotte Department Store shared his expertise: “Most younger-generation consumers prefer to purchase through the Internet or outlets.” Such tendencies in Korean consumer spending patterns are reflected in the sales trends of designer brands in department stores. The increase in designer brands in Shinsegae Department Store declined by 4 percent last year compared to 32 percent in 2011, while in the same period, Lotte Department Store’s sales dwindled by 7.8 percent from 21.3 percent. Through this transition, Ferragamo closed down during the renewal of the Galleria Department Store, and Bally shut down its Korean branch as well.