Luxury trends change in South Korea

06 September 2011

SEOUL: Consumers in South Korea, traditionally enthusiastic buyers of luxury goods, are purchasing more items on deal and increasingly use the web to compare products, a study has revealed.

McKinsey, the consultancy, surveyed 1,000 people who invested at least $930 in high-end offerings over the last year alongside 24 senior executives, and found the proportion of household income that these consumers spent on premium brands stood at 5%.

This is ahead of the 4% registered in Japan, another core market for the industry. But 45% of South Korean interviewees agreed "owning luxury goods is not as special as it used to be", up from 21% in an equivalent 2010 survey.

Elsewhere, around 40% of respondents typically looked online before buying something, although most remain unwilling to actually complete orders via the web.

An additional developing trend was that 26% of the panel now obtain more luxury goods on sale than a year earlier, while 5% made a greater number of acquisitions at full price.

Overall, McKinsey reported "heavy purchasers", or individuals splashing out $9,300-plus on these brands per year, are driving growth.

For example, 33% of this group enjoyed shopping for luxury products "as much as I always have", measured against only 12% of people logging lower expenditure levels.

"Heavy purchasers" also raised spending rates on shoes, leather goods, watches, jewellery and apparel in the last year, with the less engaged audience cutting back on everything but clothing and footwear.

On average, 14.5% of "non-heavy" category buyers have switched to cheaper brands in these sectors during the same period, when 9% traded up.

By contrast, just 6% of "heavy purchasers" had decided to choose lower-cost options, while 24% adopted the opposite route and switched to items carrying higher price tags.

Similarly, 25% of occasional luxury consumers reduced the number of purchases made and 11% ramped up their purchase levels, totals hitting 17.2% and 19.2% respectively for the more valuable customer segment.

Data sourced from McKinsey; additional content by Warc staff