Weekend with over 7,000 confirmed cases, luxury store entrances see "masked customers lining up"

Department Stores See Solo Sales Boom in Luxury Goods... Bold Price Hikes Driven by Love for Luxury
Luxury Goods Market Grows 6.5% Annually on Average... 37% Increase Since 2013
World's 8th Largest Market... Luxury Bags Rise to 4th Place, Jewelry and Cosmetics Rank 7th

On the afternoon of the 7th, customers are lined up to enter the Tiffany & Co. store on the first floor of Times Square. Photo by Lee Seon-ae lsa@

[Asia Economy Reporter Lee Seon-ae] Koreans' love for luxury goods remains unshaken despite the novel coronavirus disease (COVID-19).

On the afternoon of the 7th, when the number of COVID-19 confirmed cases surpassed 7,000, the queue of customers wearing masks in front of luxury brand stores on the first floor of Times Square caught attention. Customers wearing masks were lined up waiting to enter all luxury stores such as Louis Vuitton, Gucci, Cartier, Tiffany & Co., and Ferragamo.

A representative from a luxury store said, "We restrict entry if customers are not wearing masks, and assist entry while disinfecting customers' hands," adding, "To be honest, there has been no impact on sales decline." Another luxury store representative explained, "We have been extremely busy since morning, and there has been no change in sales due to COVID-19," and added, "Since the outbreak, customer service guidelines have become stricter, increasing the service time per customer compared to before, so the line never ends."

Mr. Kim, a customer met in front of Louis Vuitton, said, "I wanted to buy before the price went up, but I couldn't," and added, "I came out to purchase the product I had planned to buy before the price rises again." Mr. Park, met in front of the Gucci store, emphasized, "Shopping with several people at other stores feels more uneasy," and said, "Luxury stores have entry restrictions, so I can browse comfortably, which makes me feel more at ease during times like these."

In the department store industry, only luxury sales are booming alone. Although department stores nationwide have been closing due to confirmed cases visiting and customers reducing visits due to infection concerns, overall brand sales have decreased by about 15% on average, but luxury goods show a clear growth trend. Lotte Department Store's sales last month decreased by 22% compared to the previous year, but luxury sales increased by 6%. Galleria Department Store's sales in February also decreased by 4%, but luxury sales jumped by 17%. Shinsegae Department Store and Hyundai Department Store saw sales decrease by 15.8% and 12.1% respectively from the 1st to the 25th of last month, but luxury sales increased by 2.4% and 9.3% respectively. Looking at cumulative luxury sales for January and February, the growth rate is even higher. Luxury sales at Lotte, Shinsegae, and Hyundai increased by 16.7%, 16.4%, and 15.3%, respectively.

A department store industry official said, "Luxury consumption tends to be planned purchases rather than impulsive, so it seems relatively free from the impact of COVID-19," and added, "Since external environmental influences are minimal, luxury sales are expected to be continuously maintained."

However, luxury brands continue their bold pricing strategies, taking advantage of the unwavering love of domestic consumers. Louis Vuitton raised prices of major products by about 2-4% on the 4th. They also raised prices last November, making it the fourth increase in a year and a half. Luxury brands regularly raise prices once or twice a year as a custom. Since Chanel adjusted handbag prices by about 3-13% last October, the industry widely expects Chanel to soon raise prices. Earlier this year, Prada and Dior also adjusted prices early.

Luxury brands set particularly high prices in Korea. According to a 2017 report by the French financial group BNP Paribas, when the international average price of major luxury brands is set at 1, Korea is 1.14, second only to China in terms of price. Experts point to the 'Veblen effect' as the reason why luxury brands frequently raise prices and are expensive specifically in the Korean market.

The Veblen effect refers to a social phenomenon where demand increases as product prices rise. It means that prices are raised several times a year only in Korea to stimulate consumers' vanity. In reality, many consumers are desperate to get products even after prices rise. Rolex is known as a brand with particularly long waiting lists. On Korea's largest luxury community, many posts complain, "Price increases are inevitable, but I wish I could buy products whenever I want even if prices go up."

Meanwhile, according to the global market research firm Euromonitor, Korea's luxury goods market size in 2018 was estimated at $12.2396 billion (KRW 13.2932 trillion, based on the fixed exchange rate of 1,086.083 KRW in 2018). This is an increase of KRW 590.5 billion from KRW 12.7027 trillion the previous year.

Globally, Korea ranked 8th after the United States, Japan, China, France, Italy, the United Kingdom, and Germany. The growth rate is also remarkable. Since 2013, the Korean luxury market has shown an average annual growth rate of 6.5%, growing 4.7% in 2018. Compared to 2013, this amounts to 37.1% growth.

In particular, four categories?bags, jewelry, cosmetics, and clothing?have entered the world's top 10. Bags ranked 4th, surpassing France, the home country of luxury goods. Korea's luxury bag market size is $3.2347 billion, pushing France ($2.9659 billion) down to 5th place and rising one step to 4th in the world.

This content was produced with the assistance of AI translation services.