Market Shift

 

Premium brands like Gucci, Hermes, Prada, and Ferragamo are losing their iron-handed grip on the Korean fashion market, as perceptions of their brands are shifting from “essential luxury goods” to “arrogant and pretentious.” Market analysts are attributing this shift to consumers valuing smart, hit items over general brand value, and also the growing popularity of direct market purchasing channels online. 

Therefore, the brands are attempting to modify their perception in the local to market to be more free-spirited and appealing to younger consumers by entering into cheaper non-metropolitan areas and changing their existing market spaces. 

According to sources in the industry, luxury brands are now actively engaged in expanding their clientèle to target VIP clients in non-metropolitan areas, as metropolitan brand loyalty is not as high as before. Previously brands only had stories in Seoul and a few other locations, and only granted low commissions to major department stores. But this tactic is changing. 

Ferragamo Korea's experience over the past few years tells a common story with luxury brands. Sales consistently grew from 97.2 billion won (US$91.5 million) in 2011 to 98.4 billion won (US$92.6 million) in 2012, and finally to 111.9 billion won (US$105.3 million) in 2013. Yet operating profits halved, from 21 billion won (US$19.7 million) to 10.7 billion won (US$10.1 million), within two years. Due to this drastic cut in profits, Ferragamo is trying to change its image by introducing “Jelly Shoes” this summer that have a youthful appeal, in order to lead the market again. 

Gucci Korea's sales also decreased by 5.2 percent to 242.5 billion won (US$228.6 million) last year compared to the previous year. The brand is also trying to get back Korean customers by opening a pop-up Gucci Caffe on the first floor of Hyundai Department Store, close to the Trade Center, from Oct. 1 to Nov. 16. Gucci is showing respect to the Korean market by using Hanji, traditional Korean paper, at this café. 

Maison Hermes Dosan Park, which opened in Sinsa-dong in 2006, has been remodeled, and will reopen on Oct. 2. Atelier Hermes, a space to exhibit art pieces previously located on the third floor, has been moved to the first basement level and transformed into a large-scale contemporary art exhibition space. A book café has also been placed right next to the gallery so that anyone can visit and enjoy the exhibition for free. All these activities are interpreted as strategies to enhance the brand accessibility of Hermes stores by intriguing potential customers.

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