[The Fountain] An obsession to luxury brands
BAEK IL-HYUNThe author is an industry news reporter for the JoongAng Ilbo.
Publicists at major retailers had a lot of work to do on March 20 and 21. Bernard Arnault, the world’s richest person and the chairman and CEO of LVMH Moët Hennessy Louis Vuitton, visited Korea. CEOs of major Korean companies welcomed him in person. For the media report that he received special treatment from them, some companies asked media organizations to remove the names of their CEOs from their headlines. They denied the news that their owner’s family member personally checked the scheduled route of Chairman Arnault, while it is true that their CEOs were indeed at the scene one hour before his arrival. Probably, they must have thought that it didn’t look good.
In any case, the luxury tycoon has left, and the report card for the special welcome is expected to return as new store openings. New store openings are good news for consumers who would buy luxury goods in long queues despite their high prices and high-interest rates in Korea.
Nevertheless, I have a bitter aftertaste because of the fundamental reason for the major retail CEOs trying to please the luxury tycoon. Major department stores rely on luxury goods for nearly 30 percent of their sales. Luxury goods make up almost 40 percent in some cases. In 2017, the proportion of luxury sales was about 15 percent, but it has become higher. Therefore, they would still smile even if Arnault left for his next schedule after 10 minutes. They have to accept his “inspection” of the wall materials of 10 stores for 50 minutes.
At this point, I wonder if a local department store without luxury goods cannot succeed. A department store that has made annual sales of nearly 1 trillion won ($768.4 million) with a space targeting the millennials and Gen Z customers even without Hermes, Louis Vuitton and Chanel stores also is eager to host luxury brands. Is it inevitable since Korea has the world’s highest per capita consumption ($325) of luxury goods?
It is no shame that the heads of retailers personally engage in sales. President Yoon Suk Yeol himself claimed to be Korea’s No. 1 salesperson. What is truly regrettable is that they rely on some luxury brands rather than initiating prospective sales. If a luxury brand suddenly changes its mind and removes the store, the retailer suffers a direct hit. Though local department stores try to discover “new luxury brands” that are up-and-coming and high-quality, most are still imports. So they can easily lose leverage.
A Korean online fashion store made news in the industry with over 3 trillion won ($2.3 billion) in annual sales last year, surpassing the top department store. One of the success factors was to “professionally introduce” a wide spectrum of brands, more than 7,000. I hope Korean retail giants to expand their distribution channels for promising brands and nurture Korean luxury brands to be on par with foreign high-end brands. Only then can Korean retailers become proud and confident distributors.
with the Korea JoongAng Daily
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