Consumers walking on the street in Cheongdam-dong, an affluent neighborhood in southern Seoul
South Korea’s luxury goods market, estimated at around $7.1 billion, is experiencing a surge in demand led by affluent consumers in their 40s and 50s. Some renowned luxury brands will launch new stores in Korea to take advantage of the continued market boom.
The sales growth of luxury goods in Korea’s three largest department stores – Shinsegae Department Store, Hyundai Department Store Co. and Lotte Department Store – exceeded the upscale shopping centers’ average revenue growth of 2.6% for the first half of this year.
Shinsegae’s sales growth in luxury goods was 11.8% from January to June, compared with 7.9% in the same period of last year. Hyundai posted 10.1% in the first-half revenue growth, up from 8.3% from a year earlier. Lotte maintained 5% for the first half, according to industry officials on Tuesday.
“In the luxury goods market, demand doesn’t easily drop once it surges,” said a retail industry official.
“Although the sales growth is lower than 20%-30% in 2022 when shoppers rushed to revenge spending, consumers with purchasing power buy luxury goods as the demand has recovered since the end of last year,” the official added.
Korea’s luxury goods market is projected to reach $7.1 billion this year with an annual growth rate of 4.42% from 2024 to 2028, according to Statista.
Gucci’s flagship store in Cheongdam-dong, unveiled in March 2024 (Courtesy of Gucci)
CONCENTRATION ON UPSCALE AREA
As an increasing number of luxury brands seek to open or expand their businesses in Cheongdam-dong in southern Seoul, an upscale neighborhood with global high-end brands such as Chanel, Louis Vuitton, Christian Dior and Gucci, the real estate vacancy rate in the area dropped to an estimated 9% as of end-March this year from 20.8% in 2019.
The US luxury jewelry design house Tiffany & Co. and Spanish fashion brand Loewe are set to unveil their flagship stores later this year in the affluent neighborhood, while Swiss watchmaker Audemars Piguet and Vacheron Constantin will also open their new stores in the same area.
Richard Mille, a 23-year-old Swiss watch brand, reopened its boutique store in the expensive neighborhood earlier this month. The three-story building has expanded to 1,000 square meters, featuring Korea’s traditional architectural designs.
Singaporean coffee brand Bacha Coffee will launch its first Korean store in Cheongdam-dong later this month. US athletic apparel retailer Alo Yoga is planning to open its first offline store in Korea in the same area, industry officials said.
“When a global luxury brand plans to launch a new store, it considers the purchasing power of customers and public perception of the area. That is why many high-end brands pick Cheongdam-dong for the location of their flagship stores,” said Kelly Nam, head of new contents and shopping center leasing at Cushman & Wakefield.
Luxury brand stores in Cheongdam-dong, Seoul (Courtesy of Yonhap)
EMERGENCE OF BUYERS IN THEIR 40s, 50s
Shoppers in their 40s and 50s have emerged as big buyers of luxury goods in Korea, in comparison, Millennials and Gen Z led revenge spending from 2021 to 2022.
Korea’s major credit card company BC Card has found that some 68.7% of the expenditure in the luxury goods stores in Cheongdam-dong in 2023 was made by people in their 40s and 50s.
Some 15.1% of the consumption was made by those in their 30s, down from 25% last year. In contrast, about 28.8% of the expenditure was led by shoppers in their 50s, from 20% from a year ago.
Analysts say that the inflation and rate hikes hit the purchasing power of consumers in their 30s, while people in their 40s and 50s with more financial stability increase spending on expensive products.
Shoppers in their 40s and 50s increased their spending on luxury brand goods in Cheongdam-dong by 32% and 23% last year, respectively, compared with 2020.
Consumers in their 20s and 30s cut such spending in the neighborhood by 23% and 42%, respectively, during the same period.
By Ji-Yoon Yang
yang@hankyung.com
Jihyun Kim edited this article.
