'Earned 4 Trillion Won in Korea, but Only Donated 1.5 Billion'... Luxury Industry's Brazen Business Practices

Hermes, Louis Vuitton, Chanel Domestic Sales 3.93 Trillion
Dividends Surge to 117 Billion~295 Billion Won
Donations Range from Louis Vuitton '0' to 5 Billion~10 Billion Won

The "Big Three Luxury Brands" known as "E·Lu·Sha (Herm?s, Louis Vuitton, Chanel)" recorded nearly 4 trillion KRW in sales in South Korea alone last year. Despite frequent price hikes and consumer inconveniences during the purchasing process and after-sales service, they achieved record-breaking performance. While dividends were significantly increased, their contributions to domestic causes such as donations remained stingy, leading to the assessment that the "luxury brand love affair" with the Korean market continues.

[Image source=Yonhap News]

Louis Vuitton earns 1.7 trillion KRW and pays 220 billion KRW in dividends... Donations remain '0'

According to the Financial Supervisory Service's electronic disclosure on the 17th, the combined sales of Herm?s Korea, Louis Vuitton Korea, and Chanel Korea last year reached 3.9338 trillion KRW, a 22% increase compared to the previous year (3.2194 trillion KRW). The brand with the highest domestic sales was Louis Vuitton. Louis Vuitton Korea's sales last year were 1.6923 trillion KRW, a 15% increase from the previous year. Operating profit rose 38% to 417.7 billion KRW. Chanel saw a surge in both sales and operating profit growth rates. Last year, Chanel Korea's sales increased 30% to 1.5913 trillion KRW, and operating profit surged 66% to 412.9 billion KRW. Herm?s Korea also recorded sales of 650.2 billion KRW last year, growing 23% compared to the previous year. Operating profit increased 23% to 210.5 billion KRW.

Along with record-breaking performance, the scale of dividends sent to overseas subsidiaries also grew significantly. Chanel Korea paid 295 billion KRW in dividends last year, a 327% increase compared to the previous year. Louis Vuitton Korea's dividends last year were 225.2 billion KRW, up 44% from the previous year. Herm?s also paid dividends of 117 billion KRW, a 22% increase from the previous year.

On the other hand, donations in Korea were stingy. They were either at a token level or completely absent. Chanel Korea donated 1.01584 billion KRW, Herm?s Korea donated 561 million KRW, while Louis Vuitton Korea has reported '0' donations for three consecutive years since it started submitting audit reports in 2020.

On the 28th, citizens are waiting for the opening of a luxury store in front of a major department store's luxury hall in Seoul, as it became known that the luxury brand 'Chanel' will raise prices in the United States next month, leading to speculation about an imminent price increase in Korea. Photo by Jinhyung Kang aymsdream@

Luxury popularity accelerated by COVID-19... Four price hikes a year, 'bold business'

Domestic demand for luxury goods increased significantly as international travel was blocked due to COVID-19. With increased liquidity and asset growth, more people turned to luxury goods, and the attention of those who had diverse options for major expenditures such as overseas travel and luxury purchases shifted sharply toward luxury brands, causing a surge in popularity. The blocking of overseas honeymoon trips also led to more engaged couples putting emphasis on wedding gifts, making many feel they "must buy certain brand products at this time."

Additionally, frequent price hikes by luxury brands instilled the perception that "if you are going to buy someday, now is the cheapest," fueling consumer psychology. "Open runs" (lining up before stores open) began to occur, and bizarre phenomena such as tents and sleeping bags being used to queue from the night before opening appeared. Part-time workers lined up on behalf of others, and resellers buying products for resale expanded the market. Even those who had little interest in luxury goods grew curious, wondering "what exactly is this?"

In this process, only the luxury brands benefited. They exploited this psychology and raised prices up to four times a year, enjoying a surge in purchases before price hikes. Louis Vuitton raised prices twice last year, Chanel raised prices four times and increased prices once more in February. Rather than demand cooling off due to frequent hikes and already high prices, the desire to buy before the next increase grew. This explains why luxury consumption increased significantly last year despite forecasts of economic downturn due to high inflation, high interest rates, and high exchange rates.

According to market research firm Euromonitor, South Korea's luxury market size was $14.165 billion (about 18.74 trillion KRW) in 2021, ranking seventh globally. However, per capita consumption is among the highest worldwide. According to investment bank Morgan Stanley, last year South Korea's per capita luxury spending was $325 (about 430,000 KRW), surpassing the US ($280) and China ($55).

The industry expects luxury growth to slow this year amid deepening recession concerns. However, luxury brands plan to accelerate market penetration by opening symbolic stores and preparing fashion shows domestically. A distribution industry official said, "With increased purchasing power, the desire to own remains strong despite the burden of price hikes. Luxury consumption is ultimately driven by psychological factors, so frequent price increases and fatigue over inadequate treatment (service) and after-sales care will subside when there is greater consensus on these issues."

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