The Wallet of the Upper Class

Demand is high for luxury handbags costing 10 million to 20 million won (8,825 to 17,650 U.S. dollars) at Korean department stores. Last year, the main customers for such high-end goods were the Japanese. This year, however, Korean women professionals in their 30s and 40s and housewives in their 50s are buying most of the luxury handbags. Sales of luxury goods at Shinsegae Department Store since January have risen 19 percent from the same period last year, more than the overall sales increase of 12 percent. To buy certain high-end imported cars, customers must wait more than one month. High-priced travel packages to faraway places abroad are also popular, and the number of inquiries on cruises or other luxury trips has risen.

Accordingly, companies are conducting marketing campaigns for high-value customers called VVIPs (Very, Very Important Person). Lotte Department Store invited 70 customers who purchased goods worth more than 70 million won (61,780 dollars) last year at its luxury shop to a golf event May 10. After a lavish dinner, Lotte awarded a gift card worth seven million won (6,178 dollars) via lottery. Shinsegae will also hold a golf event for 180 high-end customers at the end of this month. Hyundai Department Store will offer a gift card worth 90 million won (79,400 dollars) or a luxury European cruise trip to customers buying one billion won (882,500 dollars) worth of goods a year.

Domestic household spending in the first quarter this year rose 9.5 percent year-on-year, the largest increase since the statistic was first compiled in 2003. Thanks to economic recovery, disposable income rose 7.2 percent, with the rich leading the increase in consumption. While the income of the top 20 percent of the income bracket rose 7.4 percent, their consumption grew 11.1 percent. The rich also tightened their purse strings in the six months after the global financial crisis erupted in the latter half of 2008. They began spending again from fall last year, when market jitters subsided to a certain extent.

The wealthy should spend first when the economy contracts. They have led the consumption recovery of Asian countries such as Korea and China, which lifted themselves from the global economic crisis faster than other countries. In a survey of 1,000 adults conducted by the research firm Nielsen, 91.1 percent said the rich should spend to help overcome the economic crisis. If people consider wealth obtained honestly and legitimate spending as sins, the rich will either tighten their purse strings or spend abroad. If those who are financially comfortable eat out and take taxis more, restaurant workers and taxi drivers will be better off.

Editorial Writer Hong Kwon-hee (konihong@donga.com)