[New Word Dictionary] Revenge Spending - Consumer Desire Leading to Luxury Goods and Imported Cars

Revenge consumption refers to the phenomenon where suppressed spending due to external factors such as diseases or disasters is released all at once driven by a compensatory mentality. As consumption, which had sharply declined due to the prolonged COVID-19 pandemic, recently exploded with the expansion of vaccinations, demand for luxury cars and premium brands has surged. Illustration by Seongsu Oh

[Asia Economy Reporter Kim Heeyoon] As the automobile market, which had contracted due to the impact of COVID-19, has returned to a recovery trend, the domestic imported car industry has recorded its highest-ever performance. According to statistics from the Korea Imported Automobile Association, as of August this year, the cumulative sales volume of imported cars in Korea was counted at 203,115 units. The sales volume for the same period last year was 170,724 units. The average monthly sales volume this year was also 25,389 units, and the related industry predicts that annual sales will exceed 300,000 units for the first time ever this year. Sales of imported cars priced over 100 million won also reached an all-time high. Imported cars priced over 100 million won sold up to August this year totaled 45,042 units, an increase of 65.5% compared to 27,212 units in the same period last year. This figure already surpassed last year's annual sales volume of 43,158 units by August. The popularity of overseas luxury brands is as hot as imported cars. Chanel, which implemented its third price increase this year, and Louis Vuitton, which raised prices five times, cited production costs, raw material prices, and exchange rate fluctuations as reasons for the price hikes. However, as consumers continued to line up, the recent sight of people lining up before store openings in front of large department stores, known as 'open run,' has become common. According to the National Tax Service, the individual consumption tax imposed on imported luxury bag sales last year was 25.6 billion won, an increase of 38.1% compared to 18.6 billion won the previous year. Considering that luxury bags priced over 2 million won per piece are subject to a 20% individual consumption tax on the cost price, plus an additional 10% VAT and education tax, the estimated sales amount of luxury bags last year was approximately 174.1 billion won.

Revenge consumption refers to the phenomenon where consumption suppressed by external factors such as disease or disaster bursts out all at once due to a compensatory mentality. As consumption, which had sharply declined due to the prolonged COVID-19 pandemic, recently exploded through expanded vaccination, demand for luxury cars and luxury brands has surged. The Korea Automobile Manufacturers Association predicted that the imported car market this year would increase by 9.1% compared to the previous year, reaching 330,000 units sold. The three major overseas luxury brands, Erusha (Herm?s, Louis Vuitton, Chanel), recorded sales of 2.4 trillion won in Korea last year. Despite a sharp decline in duty-free sales, Chanel Korea recorded an operating profit of 149.1 billion won, a 34% increase compared to the previous year, due to increased sales in regular stores. The related industry expects that, along with revenge consumption, the 'Veblen effect,' where demand increases even as prices rise due to suppressed desire for conspicuous consumption, will continue to drive steady demand for imported cars and luxury purchases for the time being.

Example

A: Oh, that’s a bag I haven’t seen before? Did you buy it recently?
B: Yeah. I treated myself after getting my paycheck. I’ve been under a lot of stress at work lately.
A: True, before you used to go on overseas trips to refresh your mood, but these days you can’t go at all.
B: Not being able to eat late, drink, or travel anywhere is frustrating, so it’s understandable.
A: It’s a case of revenge consumption. It’s such a relief that shopping can at least provide some comfort.

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