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FAKING LUXURY in Korea

‘It’s the power of marketing, which brainwashes consumers through various methods.’

Aug 14,2006
Here are six sure steps to make your business launch succeed in Korea:
1. Use a phone number and address in New York, Paris, London or any cool destination of your choice.
2. Open an office in the trendy district of Gangnam.
3. Hire a PR firm with good connections with well-known celebrities.
4. Throw a big party at a happening venue.
5. Invite “friends” and their “friends” and give away free samples.
6. Make sure trendy magazines write about the party, the people and the product.

Voluptuous, nearly naked Russian women wearing snakeskin body paint posed with live pythons before a roomful of amused Korean guests. After a quick photo-op, the models danced their way to “rescue” two male models strapped on the stage. At a staircase leading upstairs, attractive women in Chanel outfits, sipping Cosmopolitan cocktails, were turned away because the second floor was a VIP-only lounge, off-limit for non-celebs. At the top of the staircase stood a gleeful Phillip Lee ― whose name card read “President of Vincent & Co.,” occasionally letting his “friends” come upstairs where a dozen watches were on display for private viewings.
When asked about the legitimacy of Vincent & Co., whose products were advertised as luxury watches imported from Switzerland, even publicist Oh Jae-hyeong, who helped organize the 130 million won ($127,000) launch in June, wasn’t quite sure. In the following weeks, glossy photographs of the wristwatches in local fashion magazines and reports that they had been worn by the likes of Queen Elizabeth II, the late Princess Diana and the late Grace Kelly helped sell some of the limited-edition wristwatches for as much as 97.5 million won each.
Last week, Mr. Lee was arrested for selling watches made in a Korean factory, using Chinese components. One of the potential franchisees, also working in the tony Gangnam area, reportedly paid Mr. Lee 1 billion won and sued him after discovering that the watches were fake.
The incident sent shock waves through the industry, with many professionals recalling the June event vividly. To those working in the most affluent sector of the Korean economy, the party was lavish but nothing unusual, as many trend experts believe that’s precisely how a new luxury brand should be launched in Korea. For such events in Seoul, about 500 people are “on the list” ― “fashion people,” “opinion leaders,” “trendsetters” and “fashionistas” ― and they regularly get asked to “invitation-only” parties and go home with bags of samples as trials or gifts.
Mr. Lee told the IHT-JoongAng Daily that out of 200 watches made for gifts, he gave 60 away to Korean celebrities, who were later photographed wearing them at other fashion events, and the pictures printed in magazines. The promotion made the bogus brand an overnight success, not only making it seem legitimate but also adding a higher value to the product.
“I cannot believe the watch was fake. I’m shocked,” said an editor of an American license magazine in Korea, who published an article about the event and the watch as the latest fashion accessory “worn by royal families in Europe, as well as Korean celebrities.”
Before the news broke last week, the brand’s aggressive promotion was largely considered very succcessful, as the timepieces took off with a firm foundation right at the core of the Korean market.

Exactly how simple is it for a brand to penetrate Korea’s highly competitive market? Most products endorsed by local celebrities and fashion people ― be they sunglasses, whiskeys or facial creams ― that end up in trendy magazines propagate a strong message, which immediately adds to the desirability of the product: “Cool by association.”
The quality of the products aside, for a brand to be accepted by consumers in a specific marketing zone, such a psychological element becomes an important marketing tool, utilized by leading luxury companies around the world today. But because the idea of cool differs widely from culture to culture, when global behemoths expand their marketing zones to foreign territories, they often hire a local company or agent to help penetrate their target consumer group more quickly and efficiently.
In an attempt to capture the consumption-oriented young generation of Asia, the premium Scotch whiskey Chivas Regal 12, for instance, has thrown large-scale parties over the past few years uniquely targeted to each culture in the region. After a series of grand parties organized by the capital’s leading party planners for two years, Chivas Regal, once associated with gray suits and gray hair from Korea’s past, is appearing younger ― and hopefully hipper ― as beaming A-listers sip the drink, straight up or mixed in cocktails, on fashion TV channels and in trendy magazines.
But, surreptitiously buried between the pages of magazines and between posh boutiques lining the fashion avenue in Gangnam are some brands that are virtually unknown ― or even non-existent ― outside Korea, but have established a reputation as being “famous” luxury products “from” New York, Paris or wherever.
Until it was revived by a Korean retailer last year, MCM, a German handbag company that went out of business in the 1990s, continued to be sold in South Korea only. When newspapers reported that the brand had been resurrected, many consumers in Korea asked, “Did it ever die?”
Few people, even professionals working at the core of the Korean fashion industry, know that a prominent “French-looking” handbag brand is a clever creation of a Korean company. In magazines, the products are always shown on European models and advertised as “born in Versailles.” Since the brand’s flagship store is located next to the likes of Louis Vuitton, Prada and Dolce & Gabbana and the brand sponsors various cultural events, local consumers have been led to believe the bag is an authentic French import, thus justifying steep price tags. The owner said he plans to open a new “flagship store” in Paris “so that Chinese tourists can check it out.”
A well-known cosmetic brand, also located in Cheongdam-dong, sells a set of facial creams for more than 3 million won, which affluent buyers in the area believe are “high-end” potions imported from a New York City laboratory. The address printed on the bottle is nowhere close to what it claims to be; however, the wide range of skincare products continues to be sold through word-of-mouth as a “hot item.”

What drives this desire for luxury goods? “Sadly enough, it’s the power of marketing, which brainwashes consumers through various methods,” said Kwon Ki-chan, the president of Wearfun International, which imports European fashion brands, including Versace, Sonia Rykiel and Paule Ka.
“We have our special strategies that make sure our customers fall head over heels for, say, a new Versace bag, and remain loyal to the brand for seasons to come,” he said in an interview last year with the IHT-JoongAng Daily on the topic of selling luxury in Korea. Formerly the president of the Korea Import Association, Mr. Kwon has been a purveyer of Korean fashion businesses since he got into the industry through importing the Kenzo brand in the early ’80s.
However, it is also the minds of Korean consumers at fault when they buy falsely foreign-looking brands and pay premium prices for items made locally. During the rush years of Korea’s open and saturated market in the 1990s, both marketers and brand executives sought to “mask” Korean brands as foreign. To disguise, say, locally made premium jeans, foreign models were brought in to fill glossy catalogues and advertising campaigns. Agencies paid top dollar for supermodels such as Claudia Schiffer, Stella Tenant and Kate Moss, who posed for obscure ― and ephemeral ― Korean fashion brands that came and went every other season. Words like “New York,” “London” and “Milan” in the names and titles only added a make-believe touch to the mass marketing. The products don’t even have to end up in the hands of famous stars or the super-rich in the world of Korean fashion, in the outlandish way that Vincent watches were promoted. Last year, a Namdaemun vendor made a purse with a vaguely familiar design and labled it with a French-sounding name ― even though native French speakers could not understand the name, nor the origin. The purses, which cost less than $100, became something of a minor “luxury” item much sought after in online shopping malls.
The employment of Hollywood stars in Korean advertising isn’t all about masking but also adding value to already established brands. In the minds of Koreans, if a world-class star like Gywneth Paltrow is seen wearing an existing Korean fashion brand, suddenly the brand gains mass appeal as something international, and thus great to buy.
What amazes industry professionals is that the fake Swiss timepieces could generate so much hype so quickly ― inspiring a strong desire in Korean consumers to want the watch badly enough to pay huge sums of money.
One potential franchisee blames the fact that a reputable department store sold Vincent watches, which led to his early investment. “When such a big store sold the watches, I didn’t think twice about checking the brand’s credentials,” said the franchisee, who spoke to the IHT-Joong-Ang Daily on condition of anonymity.
Unlike major American department stores, Korean department stores do not buy items on consignment but rent out space and charge a commission. Although their floors are divided by categories, in most department stores, trendy brands, domestic or foreign, seem to be randomly located, as it is often the brand’s sales volume rather than the country of origin that becomes a determining factor in capturing the most visible locations in the store.
Just by looking at a fancy store, its products and price range, even the most discerning eye in the luxury business can have a hard time distinguishing a local brand from foreign.
Mr. Oh, the publicist, said he is glad to no longer be involved in promoting the now-defunct watch brand, but that when he traveled to Europe last month, a lot of people noticed the fancy Vincent watch he was wearing and wanted to buy it. “That means the watch has a good design. So it is sad because [Mr. Lee] could have made a substantial brand out of such well-designed products,” Mr. Oh said in a telephone interview.
Comparing Mr. Lee to Leonardo di Caprio’s character in the movie, “Catch Me If You Can,” Mr. Oh said, “A crook, if he uses his talent well, can become a brilliant analyst. He should’ve made a Korean brand instead. He didn’t have to lie.”
Mr. Oh is among those in the Korean glamour industry who believe Korean brands also have a future on their own local turf. “Korean-made brands have quality goods these days, and consumers just have to learn how to appreciate them,” he said.

Tips to prevent being fooled by fakes:
1. Don’t believe everything you read in magazines.
2. Don’t listen to everything PR people or shopkeepers say ― they’re paid to promote products.
3. Don’t trust what promotional Web sites say.
4. Don’t believe what industry professionals think they know.
5. Google search a brand and its history, and look for authorized dealers in Korea.
6. Check the company’s address and phone number by calling or visiting.
7. To check an international fashion designer’s label, go to www.style.com and verify the collection.
8. If the trade is said to be associated with British royal family members, verify that fact at www.royalwarrant.org.
9. If you suspect a fraud, contact the Fair Trade Commission at www.ftc.go.kr, English available, or (02) 503-2387.
10. If a seller refuses to refund your purchase, contact the Consumer Protection Board at www.cpb.or.kr, English available, or (02) 3460-3000.


by Ines Cho


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