"Which Luxury Item Should I Buy Today?" Rising 'Luxury Big Spenders' Among 20s and 30s Amid COVID-19 Recession

Lotte Department Store, 'Christian Dior' Pop-up Store. The photo is unrelated to specific expressions in the article. [Image source=Yonhap News]

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[Asia Economy reporters Seunggon Han and Yeongeun Kim] "Today is the cheapest day.", "It's sold out because it's so popular; if it's available, you have to buy it."

Despite the consumption market slump caused by COVID-19, the luxury goods industry still maintains demand. In particular, the 20s and 30s 'big spenders on luxury goods' are making significant contributions to sales growth. Their reasons for purchasing luxury goods are diverse, including reselling the items after buying them.

Reselling is sometimes called 'Shatech,' a newly coined term combining 'Chanel' and 'investment' in Korean. This indicates that among people in their 20s, luxury goods are no longer high-priced items but familiar consumption targets.

Experts analyze that the psychological desire of young people to show off luxury goods on SNS platforms like Instagram and the economic benefits gained through a kind of investment using luxury goods are connected, leading to luxury consumption among the youth.

The luxury consumption of people in their 20s is confirmed by numbers. According to an analysis of L.Point transaction data (39.5 million members) by Lotte Members' research platform Lime from the second quarter of 2017 to the second quarter of last year, the number of luxury purchases by people in their 20s increased from 6,000 in Q2 2017 to 44,000 in Q2 2019. In two years, the number of luxury purchases by people in their 20s increased 7.5 times.

The reasons for luxury consumption among people in their 20s are varied. According to the 'Trend Y Report' released by Lotte Members in November last year, when purchasing luxury goods, they valued △practicality (32.8%, multiple responses) as the second most important factor after △design (63.3%). △Brand name (26.2%) ranked fourth.

Looking at consumption patterns, practicality for everyday use was significant. △Small wallets (34.2%), △card wallets (25.1%), and △sneakers (23.1%) followed. Also, a clear tendency toward 'Nasimbi' (consumption for psychological satisfaction) and the 'FLEX' culture (showing off style) on SNS platforms like Facebook are analyzed to be related to luxury consumption among people in their 20s.

The luxury industry, which continues steady demand thanks to people in their 20s and 30s, keeps raising product prices. Burberry and Balenciaga raised prices last month, and brands like Dior, Burberry, Tiffany, and Ferragamo also implemented price increases this year.

The French luxury brand Chanel also raised prices on some products, including handbags, on the 2nd of this month. With this increase, the price of one of Chanel's popular handbags rose from the 9 million KRW range to the 10 million KRW range.

In May, luxury brand Chanel announced a price increase, and customers lined up in front of the luxury goods hall at the Lotte Department Store main branch in Jung-gu, Seoul. Photo by Yonhap News

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This price increase by Chanel is the second this year, following a roughly 20% price hike on major products in May. However, despite these price increases, hundreds of people gathered in front of the store even before the department store opened, causing an 'open run' phenomenon.

One netizen posted on an online luxury information community, "I heard Chanel raised prices this time; I should have bought it earlier. Since prices will rise again anyway, it's better to buy as soon as possible." They added, "If you buy consistently popular products, they will have value as vintage items over time, so buy quickly before the supply runs out." Luxury purchases are no longer unfamiliar consumption among people in their 20s.

Experts explain that the causes of the 'luxury consumption' phenomenon centered on people in their 20s and 30s can be broadly divided into two. First, this year, due to reduced external activities like overseas travel caused by COVID-19, a 'compensatory consumption' psychology acted to release suppressed consumption by purchasing luxury goods. Second, there is the reason of gaining economic benefits through 'reselling.'

Professor Eunhee Lee of Inha University's Department of Consumer Studies said, "The 20s and 30s generation is characterized by active SNS activity. Due to COVID-19 restricting offline activities, they are more immersed in SNS, where it is difficult to attract attention unless something is unique or differentiated, so they focus on luxury goods."

She added, "Another reason is investment using luxury goods. Nowadays, with rising housing prices and poor economic conditions, the 20s and 30s generation feels frustrated, so they seek psychological satisfaction through luxury purchases and try to regain economic power by reselling whenever they want."

She continued, "Regardless of current conditions, they buy luxury goods that have rarity and can attract people's attention, and then resell them later, so the enthusiasm for luxury goods as an investment cannot be ignored as one of the causes."

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