Korea leads the way for Asia

The Asian market has a new ace up its sleeve. If the lockdowns that have been taking turns in China since last spring affecting major metropolises, with Shenzhen and Chengdu currently under restrictions, are a critical element for the region's development, for several months now the Far East's run in the luxury sector has been carrying on thanks to South Korea. A country that, although far from competing with Greater China in terms of area and density, has been emerging in recent months both in terms of cultural relevance and numbers of high-end consumers, representing a positive item on corporate balance sheets and capturing the attention of analysts and industry experts.

And while numerically speaking it may not be the new China, for the fashion industry Korea has nonetheless become the new Japan. These are the words of Roberto Costa, head of global luxury investment banking at Citi, who explained to MFF: «If you look at the size of the Korean luxury market compared to the Japanese one, you can see that the former is growing significantly and the gap with the Land of the Rising Sun is now reduced well below 50%. And it seems that this is also an increasingly important outlet for Italian brands».

An exceptional trend also noted by the Altagamma consensus 2022 analysis, which, despite lowering its forecast for the annual increase in luxury personal goods consumption in Asia from +9% to +5% due to the impact of closures and restrictions, highlighted the strength of this small emerging region. «South Korea's performance in this hiccup growth scenario related to Chinese lockdowns is remarkable. The country is confirmed to be a small but very dynamic market by all analysts,» Claudia D'Arpizio, senior partner and global head of fashion & luxury at Bain & company, explained. «In the past two years, South Korea has undergone a profound transformation, increasing its size and cultural relevance. As a result, brands have successfully reinvented their business model to meet the growing local demand».

Demand that, according to the latest available surveys, shows no signs of abating. According to BofA-Bank of America’s evaluation, local spending for luxury goods in Korea increased by 20% year-on-year in June, continuing the growth trend from the 24% of May. On a three-year cagr-compound annual growth rate, Korean spending amounts to +24%, a slight decrease from the 26% in May. These digits, however, still highlight the steady trend of the luxury market in the country. Furthermore, the number of tourists increased to +196% in June, from a +136% in May.

«Luxury spending in Korea was solid in the second quarter of 2022, with a three-year cagr of +26%, in line with the positive trend of the first quarter,» BofA analysts stated. «Also, the visitors from mainland China decreased by 35% in May, sending a signal of improvement since the -55% of last April». Although the updated figures are still not available, BofA experts highlighted how, in general, the region’s performance has carried on even during summer months thanks to international tourism and normalization of retail sales.

To demonstrate the appeal the Korean market has on luxury brand, there are numerous partnerships created between Western Maisons and local influencers and celebrities. For example, Maisons such as Chanel, Céline, Ysl, Tiffany & co or Cartier, which recruited as brand ambassador people such as Blackpink, the K-pop girl group born in 2016 under Yg entertainment and composed of Kim Ji-soo, Jennie Kim, Rosé and Lisa. The group, stars of campaigns and red carpets, chose four total pink looks designed by Casey Cadwallader for Mugler for a photoshoot that last week announced the release of their latest single.

It is also emblematic the fact that Vestiaire collective, the e-commerce platform for the resale of second-hand luxury clothes and accessories, recently launched a service in South Korea to allow its users to use the platform in Korean using Korean currency, access local selling points and an authentication center in Seoul. The capital itself was chosen by Alexandre Mattiussi’s Ami Paris to unveil the new spring-summer 2023 collection. The co-ed show will take place during the first day of Seoul fashion week. (all rights reserved)