McKinsey’s latest report on luxury goods concludes that there’s now an important shift in the fashion-savvy Korean market, which was worth $4.5bn last year. People used to buy brands to show they were keeping up with trends and to show off that they had cash to flash. Now, McKinsey’s latest survey suggests people are buying brands to stick out from the crowd, not be part of the craze.
Koreans have tended to buy luxury goods as a way of signaling social status and for self indulgence. People wanted other people to know that they were wearing something expensive, so they bought famous brands, often with conspicuous logos or labels. That attitude is becoming passé; in 2011, 45% of those surveyed agreed that “owning luxury goods is not as special as it used to be,” compared to just 21% in 2010. As a result, Koreans are beginning to think more about differentiation than display; 39% of heavy buyers and 26% of all respondents say that “I increasingly prefer luxury brands or items that help me stand out from the crowd.”
McKinsey notes there is also strong potential for men’s luxury goods, which still only account for 9 per cent of the luxury market – half of the level in Japan. Young people are also rapidly turning into fashion victims. Sales to 20-somethings rose at a stunning annual rate of 74% from 2005-10, compared to 9%
for 50- to 60-year olds.
What McKinsey shows is that Korea is still a good place for fashion houses – luxury sales have been up about 12 per cent each year since 2006 – but they must adapt to changing trends.
Intriguingly, several luxury goods makers note Korean culture is becoming so hip around Asia and beyond thanks to TV dramas and music, that they need a strong foothold in Seoul to identify trends that could spread from there.
But there’s also an unhappy dimension to luxury in Korea, as the gulf between rich and poor becomes increasingly severe.
While the McKinsey survey shows that Koreans are still more likely than the Japanese, Europeans or Americans to be willing to pay full price for luxury, at the same time, more and more are seeking out bargains.
Image: Louis Vuitton Seoul