Once fashionable street loses retail luster
However, there’s been a change to the scenery recently as some shops have closed, leaving empty store space behind.
A two-story shop that used to feature Calvin Klein attire in the showcase window has shut down. Another six-story building where Abercrombie & Fitch sold clothes nearby has been empty for four months. No one yet has taken on the high rent for the shop.
A lease for the former Abercrombie store is 235 million won ($204,970) per month on top of a 6 billion won deposit. The Calvin Klein building also is asking at least 65 million won a month with a 3 billion won deposit.
“Many brands were vying to push into the luxury street, even by adding a premium on top of base rent fee, because the area used to be a No. 1 pick for high-end fashion brands,” said a realtor operating in Cheongdam-dong, southern Seoul, who declined to be named. “However, we haven’t been leasing out all our store space from the second half of last year.”
A rapid shift in customers’ shopping habits from buying offline to online is reshaping the luxury goods industry. The so-called showrooming practice, which refers to customers visiting stores just to take a look at the product and placing orders online, is becoming more prevalent over all segments of the retail industry.
The trend has been a major blow to the traditional brick-and-mortar luxury goods shops.
Not only Calvin Klein and Abercrombie but also menswear brand Boggi Milano and high-end designer Loro Piana of Italy have moved out of Cheongdam. The change is a stark comparison to late 1990s when the street attracted major luxury brands to the area. People lined up at real estate agencies to launch a brand’s flagship store there despite costly rent that reached as high as hundreds of millions of won per month.
While the brands have often sold their goods at a higher price in Korea compared to other countries, the rise in online shopping has created a way for local customers to purchase these brands cheaper through foreign direct purchase, according to analysts.
But the impact of online shopping is not only limited to these masstige brands. Local department stores are closing down shops of prestige brands like Louis Vuitton and Burberry.
Hyundai Department Store removed a Burberry shop in the first floor of its Mia branch in northern Seoul in February. In the same month, Daegu Department Store also closed a Louis Vuitton shop in one of its branches. AK Plaza yanked early this year its Gucci store, which was in the first floor of its branch in Bundang, Gyeonggi, in a move that follows the closing of the Louis Vuitton shop last year. The popular Shake Shack burger joint will replace Gucci in AK Plaza.
Meanwhile, online luxury shops are thriving.
The German luxury shopping site mytheresa.com started a Korean service last month. It also operates in English, Italian and French. The online shop offers air delivery when a Korean customer wants to return products and free consulting by telephone.
The special services for Koreans come as a massive number of local customers turn to online shops for luxury goods. Mytheresa.com hopes to capitalize on that growing demand. According to mytheresa.com, sales in Korea grew by more than 150 percent year on year last year.
Local online platforms reported similar sales data.
According to Auction, the number of foreign luxury brand sales through its online platform increased on average 29 percent year on year during the first quarter this year. Sales of fashion accessories like bracelets and scarves increased 230 percent and shoes 79 percent. Demand for used luxury goods also grew 70 percent year on year.
Online retail sites offer multiple benefits to shoppers. On top of convenience, the relatively cheaper prices and seasonal coupons or discount sales attract many customers amid a prolonged economic slowdown in the country.
“Even a little bit of discount can feel like a relief to consumers who have been saving money by cutting daily spending to buy luxury goods,” said Goh Hyun-sil, a director of fashion at Auction.
As online retail sites strengthen their marketing efforts, some of the stalwart luxury brands have begun opening online shops. Chanel, which long operated only offline, opened an online shop last year. Burberry broadcast its fashion show on Twitter and offered customers a chance to directly purchase the products they saw in the show.
BY CHOI HYUN-JU [email@example.com]
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