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Korean Luxury

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Consumer and Shopper Insights August 2011

Korea’s luxury market: Demanding consumers, but room to grow

By Aimee Kim and Martine Shin

Key themes from the 2011 McKinsey Korea Luxury Consumer Survey
Every year since 2006, sales of luxury goods in South Korea have risen at least 12%1, to an estimated $4.5 billion in 2010. In the first four months of 2011, sales at department stores were up more than 30% compared to 2010. 2 This continues an established trend, as last year’s report on the market showed (see report at csi.mckinsey.com: “Living it up in luxury.”) Still, insiders are asking whether it can last. For one thing, according to McKinsey’s survey, the percentage of household income that luxury consumers spend on luxury is already higher in South Korea (5%), than in Japan (4%)3—and the Japanese luxury market has been stagnant in recent years. Moreover, the performances of famous brands in Korea have been mixed. For example, LVMH and Ferragamo continued to do well, but others, like Gucci Group and Dior, saw sales drop in real terms in 2010.4
1 2 3 4 5 6

Thus, while the headline news is that the luxury market is still growing strongly, uncertainty is also mounting. In this year’s report, McKinsey addresses these concerns, which come in the form of three key questions: Can South Korea keep it up? What’s changing? And what do these trends mean for the players in the luxury industry? To answer these questions, for the second year in a row, McKinsey surveyed 1,000 Koreans who had purchased at least 1 million Korean won ($930) in luxury goods in the previous year across four categories —fashion apparel, leather goods, shoes, and watches/jewelry. Among the respondents were 200 “heavy purchasers”—those who had spent at least 10 million Korean won ($9,300). We also interviewed 24 senior executives of luxury-goods companies. Here’s what we found.5

Let’s start…...

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