So-called ‘revenge spending’ has been credited with a significant upturn in sales of high-priced retail goods in South Korea which has tentatively emerged in recent days from a lockdown during the Covid-19 pandemic.
Industry analysts say that the pent-up desire for consumption is leading to an increase in purchases of luxury goods to display wealth.
Revenge spending refers to the outpouring of pent-up desire for consumption at once. Another factor cited by South Korea’s fashion industry experts is the ‘Veblen effect’ which refers to a phenomenon in which products sell better as prices rise – a form of conspicuous consumption.
Although low- and mid-priced brands in South Korea are struggling with the effects of the Covid-19 outbreak, expensive brands are doing well.
At the height of the spread of COVID-19, sales at Lanvin Collection and Time have increased significantly, Handsome Corp, an affiliate of Hyundai Department Store, and the top player in the women’s fashion industry, told Korea Bizwire.
Lanvin Collection, which is one of the most exclusive offerings among the Handsome brands, is a license brand introduced jointly by Handsome and French luxury brand Lanvin Paris. It saw sales rising 35 per cent year on year during the first quarter.
Time, the flagship brand of Handsome, also saw its online sales jump 58 per cent in the first quarter.
Meanwhile, Isabel Marant, a French luxury brand imported by LF Corp., saw its sales rise 10 per cent year on year.
A similar phenomenon is emerging in the men’s clothing market. Thom Browne, imported and sold by Samsung C&T Corp, saw its sales rise 20 per cent thus far this year.
Thom Browne is a semi-luxury brand known for its men’s suits, and has recently enjoyed explosive popularity among young people with the release of Samsung Electronics’ Galaxy Z Flip Thom Browne edition.
With the coronavirus crisis reshaping the online market, some commentators say these brands are benefitting from quickly establishing online sales systems.
All of the brands whose sales have increased tout their wares via online portals — Handsome.com, LF Mall, and SSF Shop.
The fact that there is no difference between offline and online prices also contributed to the increase in sales.
“Covid-19 is intensifying the gap between the rich and the poor in the fashion industry,” an official from the fashion industry told Korea Bizwire.
“A growing number of young and middle-aged people are now purchasing products from expensive brands online that they would never have considered in the past.”
Meanwhile, according to a McKinsey study, luxury sales by South Korean department stores dipped in the double digits in March when social-distancing measures became widespread. But during the first week of April, sales rebounded. Overseas luxury brand sales rose by 5.4 per cent and overseas watch and jewellery sales were up 27.4 per cent at Lotte.
McKinsey suggests that as other regions continue to struggle during the Covid-19 crisis, South Korea could emerge as a fast-rebounding market for luxury sales and one brands should keep their eyes on to understand future consumer trends and behaviour across Asia-Pacific.
- Original reporting by DM Park of Korea Bizwire and Robert Stockdill of Inside Retail Asia.