Sales of Top Brands Rise Despite Ailing Economy

A 26-year-old man who entered a foreign consulting firm after graduating from a prestigious university in February is more conscientious of his appearance than many other men his age.

He enjoys wearing Time Homme business suits, which usually cost between one million and 1.2 million won each. His shopping list also includes tailor-made suits bought once or twice a year from a hotel shopping arcade in southern Seoul.

The man, whose salary is as high as a mid-level manager working for conglomerates, also bought an Audi A4 with financial help from his parents, who run a business.

○ Young brand name seekers splurging

Sales at large supermarkets and department stores, which gauge consumer confidence, have seen a sharp contrast this year.

Large discounters saw sales rise 0.1 percent year-on-year in April, while those at department stores jumped 6.5 percent, according to the Knowledge Economy Ministry.

Sales of brand name products at department stores have increased from the high teens to the mid-20 percent level since October last year. This nixes earlier predictions that department stores would see a sales decrease, while large discount stores, which tend to perform well in tough economic times, would enjoy higher sales.

Retail experts say the boom in luxury brands amid an economic slowdown is due to changes in consumer spending among 20 and 30-somethings. People in the two age groups spend less on famous brands than those in their 40s and 50s, but the strongest sales have come from the younger bracket.

Sales of small brand-name items that people in their 20s and 30s prefer, such as footwear, bags, sunglasses and watches, have jumped 60 percent. Those items are often classified as sundry goods and are relatively cheaper than designer clothes.

“Generally, brand name shoppers buy on weekdays, but weekend sales of brand name shoes by ladies in their 20s and 30s have gone up sharply,” said Avenuel manager Lee Seung-min. Avenuel is a high-end retailer run by the Lotte Group.

○ “Get all you want!”

Unity Marketing, an American marketing consulting firm, defined the young and affluent born after 1970, or the “Want-it-all Generation.” Unity said this new generation’s spending appetite for luxurious goods are 30 percent stronger than their predecessor and often beyond their financial means.

Galleria Department Store, which relies heavily on brand name products, saw a 50-percent increase in the number of customers between January and April this year. It also saw sales jump 70 percent over the same period.

The portion of high-end customers in their 20s and 30s at Galleria also rose to 10 percent from six percent.

“It is easy to see students carrying brand name bags on university campuses,” said Ye Jong-seok, a professor at Hanyang University. He added that an increase in the number of brand name shops, which were rare in the past, is another reason why more young people purchase well-known brands.

Luxury goods pundits say spending on brand name products grows common to all generations when per capita income surpasses 20,000 U.S. dollars. Master Card predicts spending on luxury brands by young and affluent Koreans will reach 8 billion dollars by 2016.

Top brands are also aggressively marketing to those in their 20s and 30s with a fat wallet.

Louis Vuitton opened a store inside Shinsegae Department Store in the southern Seoul suburb of Yongin last year, its first outside a metropolitan area in Korea. Several of the world’s top jewelry companies like Tiffany, Van Cleef & Arpels and Cartier have also held exhibitions in Korea.

The distribution industry hopes that growth in luxury item sales will also help boost revenue from other products and recover consumer sentiment, resulting in a broad economic recovery.