Consumers in Asia Including Koreans Turning Their Backs on Luxury Brands

Global luxury brands as a group have had a very weak performance during the first half of this year, as the sales of leather goods dropped. Sales are constantly declining, especially in Korea.

According to the Wall Street Journal (WSJ) on August 6, the Kering Group of France, which owns Prada and Gucci as well as the world’s biggest luxury group Louis Vuitton Moët Hennessy (LVMH), had similar or lower revenues and profits compared to last year.

The WSJ pointed out that leather goods are the main reason for the weak performance. The WSJ analyzed that since margins on leather products including handbags are generally higher than that on other clothing, the sales of leather products determine the overall profitability.

A change of regional preferences also affected the sales of luxury brands. For Prada, sales in the Asia-Pacific region dropped by 2 percent despite a 12 percent increase in China. Consumers in Korea, Singapore, and Hong Kong especially turned their backs away. In addition, the sales growth of LVMH in Asia was only 3 percent except in Japan, a sharp decline from last year’s 13 percent.

On the other hand, the Financial Times already reported that the reason for the sluggishness of three largest luxury markets worth €8.3 billion (US$11 billion) was a change in consumer taste, focusing on the Korean luxury market last month. The FT analyzed that young Korean consumers prefer less expensive but trendy brands to more expensive traditional luxury brands, and that some brands are already considered old-fashioned and common.