Shoppers line up in front of Shinsegae Department Store in Sogong-dong, central Seoul, Monday, to buy luxury products. (Choi Jae-hee/The Korea Herald)
For Kim Su-yeon, a 40-year-old office worker, standing in line for a Louis Vuitton bag has become a way to beat the heat -- instead of traveling overseas for some relaxation and summer fun.
“All my travel plans came to naught due to the coronavirus spread, so I decided to pour my savings into Louis Vuitton bags,” said Kim, who joined the lines stretched along the street leading to the main branch of Shinsegae Department Store in Sogong-dong, central Seoul, Tuesday. Her quest for a new luxury bag began at 6 in the morning, despite heavy rains.
“(Buying luxury goods) is a sort of gift for myself, particularly these days when my daily routine, including meeting friends and going out for sports, has been disrupted by the fast-spreading virus,” she said.
Kim is one of many South Koreans enjoying so-called “revenge spending,” a shopping trend that has emerged as an alternative to enjoying a summer vacation in an exotic spot overseas, and also as a way of rewarding oneself for enduring the inconvenience associated with the pandemic, experts say.
“To compensate for the disappointment caused by unexpected stressors like the coronavirus lockdowns, shoppers, particularly mid- and high-income people, tend to spend lavishly on rare luxury goods,” said Lee Jun-young, a consumer science professor at Sangmyung University.
“People have a tendency to focus on the present under the theme of ‘carpe diem’ and boost spending in the wake of health-related crises, like the coronavirus outbreak, concluding that life eventually comes to an end,” he said.
Starting in February, when the coronavirus began to sweep across the nation, such revenge spending saw a remarkable increase in the luxury goods sector -- more so than with other commodities.
For instance, while most of the local department stores’ product categories such as domestic fashion goods and household items saw sales shrink by two-digit figures in May, leading to an overall decline of 7.4 percent, sales of personal luxury goods -- high-end fashion, watches, jewelry and apparel -- surged 19.1 percent during the same period, according to the latest data from the Ministry of Trade, Industry and Energy.
Consumer demand for luxury goods has continued to soar. As of July, major department store operators -- Shinsegae, Lotte and Hyundai -- recorded growth in luxury sales of 54.8 percent, 48 percent and 43.5 percent, respectively, industry sources said.
The uptick in luxury spending here runs counter to the trend in global luxury markets. Western Europe, home to the world’s largest luxury goods conglomerates, has seen a downturn in sales in this category, which dropped some 20 percent on-year in the first half of this year due to the COVID-19 shutdown of local brick-and-mortar stores, according to Bain & Company, a global strategy consulting firm.
In addition, North America, the world’s largest luxury market, is expected to report a decrease of up to 85 percent in revenue for March and April from the previous year, data showed.
Foreign fashion experts are now eyeing Korean customers, saying a luxury rebound here could drive up a recovery for international luxury labels.
“Korean customers are famous for loyalty towards the high-end brands. I didn’t notice (open run shopping) such a phenomenon in West Europe where people here are usually queuing for Zara (a Spanish fashion retailer), not Chanel,” said Yana Bushmeleva, chief operating officer at Fashionbi, a global data and insights provider in the fashion and luxury industry.
“All the luxury brands across the globe are hoping to compensate losses from the COVID-19 crisis through the growth in sales in Asia, including the South Korean market. This is why Gucci opened a client service in Korea, which was only set up in the US, Japan and Italy and Cartier has relaunched its Pasha de Cartier watch in South Korea alongside China in July, while the product’s global debut was originally programmed for September,” she said.
In fact, revenge spending in the midst of an economic crisis is not a new consumer trend here. Luxury fashion houses in Korea posted sales increases of 32 percent during the 2008 financial crisis. And spending on luxury goods jumped 10 percent in 2015, when Middle East respiratory syndrome broke out here, industry data showed.
The difference this time is that shoppers are more online-savvy. Last month, overseas direct purchases of luxury goods via online shopping malls Gmarket and Auction, operated by e-commerce retailer eBay Korea, were up fivefold from a year earlier, officials said.
This added momentum to the digital initiatives of global luxury labels, which have been slow to pick up on e-commerce trends. Major fashion luxury houses, including Hermes and Prada, recently opened online stores for the first time in Korea.
Meanwhile, Korea is the eighth-largest luxury market in the world, after the US, Japan, China, France, Italy, England and Germany. The local luxury market was worth 14.82 trillion won ($12.34 billion) in 2019, according to market research firm Euromonitor.
By Choi Jae-hee (firstname.lastname@example.org