South Koreans are the world’s largest spenders on luxurious items

Whether or not it is calf-leather Italian Prada luggage or basic, checkered British Burberry trench coats, South Koreans are the world’s largest spenders on private luxurious items per capita, Morgan Stanley mentioned.

The funding financial institution estimated South Korean complete spending on private luxurious items grew 24% in 2022 to $16.8 billion, or about $325 per capita. That is way over the $55 and $280 per capita spent by Chinese language and American nationals, respectively, in line with Morgan Stanley estimates.

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Luxurious manufacturers have additionally highlighted sturdy gross sales in Korea.

Moncler mentioned its income in South Korea “greater than doubled” within the second quarter in contrast with earlier than the pandemic. Cartier-owner Richemont Group mentioned Korea was among the many areas the place gross sales grew by double digits in 2022, in contrast with each a 12 months and two years in the past.

Whereas Prada mentioned China lockdowns contributed to a 7% decline in 2022 retail efficiency, the style home mentioned the drop was “mitigated by the sturdy efficiency in Korea and South East Asia.”

Morgan Stanley analysts defined the demand for luxurious items amongst South Korean consumers is pushed each by a rise in buying energy in addition to a need to outwardly exhibit social standing.

“Look and monetary success can resonate extra with shoppers in South Korea than in most different international locations,” analysts wrote within the report.

Shows of wealth are additionally extra socially acceptable in Korean society. A McKinsey survey discovered that solely 22% of Korean respondents take into account exhibiting off luxurious items to be in dangerous style, in contrast with 45% of Japanese and 38% of Chinese language.

The demand in luxurious wares was additionally supported by the rise in family wealth. Financial institution of Korea information exhibits the nation’s family internet value rose 11% in 2021. About 76% of family wealth in Korea is in actual property, costs for which have elevated considerably since 2020.

The funding financial institution additionally famous luxurious homes have tapped Korean icons to additional catalyze demand.

“Practically all the main Korean celebrities are model ambassadors of the main luxurious homes,” the report famous, like Fendi and actor Lee Min-Ho or Chanel and rapper G-Dragon.

Tiffany & Co. made Blackpink singer Rose the face of its HardWear assortment, which was very well-received and doubled gross sales for the road.

Nevertheless, Bain & Firm cautioned in opposition to using per capita metrics for luxurious good consumption.

“Luxurious by definition will not be a mass market product,” Bain & Co companion Weiwei Xing instructed CNBC.

“I might recommend to prorate the entire luxurious spending by variety of inhabitants that is center class and above, which might be a extra significant measure to replicate perspective and consumption in the direction of luxurious,” Xing mentioned, including that would chop the hole.

Nonetheless, Morgan Stanley mentioned the thriving Korean luxurious market is a “good preview” of what the Chinese language luxurious market may change into, which it mentioned stays “underpenetrated.” The analysts mentioned the 2 international locations share similarities in disposition towards luxurious gadgets as standing markers.

Presently, South Korean annual per capita spend on luxurious items stays greater than six occasions greater than that of Chinese language spenders.

Globally, McKinsey projected the posh market to develop between 5% and 10% in 2023, buoyed by demand from the U.S. and China.

“We anticipate development to renew after China recovers from the present Covid waves, which ought to occur by the primary quarter,” Xing mentioned.