The recent lunch also saw Walpole members sharing some of the latest insights from the market and talking about market entry strategies with brands from the jewellery, fragrance and interiors sectors.
Korea’s, importance and market potential, despite its comparative size, is undisputed and remains a priority for British luxury brands and their Asia strategies.
Korea has a population of 50 million people but the capital, Seoul, dominates and is home to 20 million people – as such Seoul itself represents an important strategic luxury hub in the region. The business and wealth generation is very concentrated – 30 companies account for 80% of GDP and those companies are managed by just 20 families.
According to Bain & Company, sales of luxury goods in Seoul alone reached $7.6 billion last year and the number of multi-millionaires in the city itself (those with net assets of £10 million or more) has almost doubled over the last decade to 4,410 according a report by New World Wealth. Walpole member brands including Burberry, Church’s, DAKS, Ettinger and Mulberry all report strong performance in the market and positivity about future growth.
On delving deeper during the discussions a number of important themes emerged as to why Korea presents such an interesting opportunity for British luxury brands despite the recent political context.
Ease of Doing Business Firstly and fundamentally there is the simplicity and framework for conducting business – Korea is ranked in 8th place for ease of doing business (by comparison China is placed at 96 and Japan at 27) and 91% for business freedom - which looks at critical aspects such as rule of law, regulatory efficiency and market freedom - (China ranks 54% and Japan 82% respectively).
Market Entry Routes and partners In terms of market entry strategies on the surface the practical routes to market are with a selected choice of partners through Korea’s family-run chaebols [conglomerates] which dominate the fashion and retail landscape. For a brand with the right partner this can lead to quick expansion. There are other routes through agnostic distributors and of course own stores for the businesses with the financial scale. However, challenges await any brand that goes into the market without a thorough understanding of the interconnected relationships and the landscape - partners such as the Chamber of Commerce can provide detail knowledge not of the opportunity but also how to navigate and find the right partner.
Importance of the Chinese customer Secondly, is the undeniable importance of the Chinese visitors and a term coined by the WTO of “shopping tourism”. The Chinese consumer is a key driver for luxury globally and the influence of the Chinese tourists in Korea is significant - Chinese tourists are the biggest foreign spenders in Korea, with an average tourist spend six times that of the Japanese visitor to Korea. The recent political tensions have impacted group travel from China to South Korea but generally concerns for any long term shift and impact are relatively low.
The domestic Korea customer Importantly the spending power of the Chinese visitors isn’t to the detriment of the domestic Korean customer. Korean consumers are highly sophisticated and discerning, tech savvy, with both a strong eye for creativity as well as a desire to seek out innovation and individuality. Importantly for British luxury brands the Korean customer has a well-informed appreciation of highest levels of quality synonymous with our brands but also a desire for creativity and new trends. For brands to succeed they need to ensure that are offering newness and staying ahead of trends to maintain consumer interest.
Korea as a trend-setter Another aspect that was a central theme in any analysis is Korea’s position as a trend setter across the entire region. Korea sits at the crossroads of music, popular culture, fashion and entertainment and the status and appeal of Korean films, TV, particularly the stars of reality TV and K pop culture remain influential both domestically and in China. In terms of the retail landscape Korea is also seen as innovator with inspirational in-store experiences, cutting-edge design as well being willing to support young designers and new brands.
In terms of trends we are seeing a uplift in interiors as consumer are starting to invest in their homes, which while often small apartments are becoming increasingly important statements of taste. historically consumers would spend on cars, fashion, watches or beauty and eating out but a new trend is this desire to also invest in their homes and there is an opportunity for interiors businesses – the Conran shop (a new Walpole member) have recently entered the market.
Historical & Cultural Ties There is also a deeper connection on an historical and cultural level between Britain and South Korea. Britain and British brands are held in high regard and affection as the UK was the second country, after the US, to establish diplomatic relations with Korea.