By Heekyong Yang and Silvia Aloisi
SEOUL (Reuters) – As COVID curbs cut travel and duty-free shopping, South Koreans are driving a luxury goods boom at home that has left Chanel barring nearly a third of would-be shoppers to stop bulk buyers snagging $10,000 bags for resale with markups of 20% or more.
The storied French fashion and luxury company told Reuters it has seen traffic to its boutiques in South Korea skid since it began screening for customers it believed might be stocking up purely to flip to others in the resale market.
“We were able to identify them (bulk buyers) after having analysed their buying patterns. Since this policy was implemented, the traffic in our boutiques has decreased by 30%,” Chanel told Reuters in a statement. It didn’t disclose exactly how it deemed those customers to be potential bulk buyers, and the privately owned business doesn’t disclose sales numbers by country.
Chanel’s strategy, implemented since July last year, came as global demand for luxury goods was picking up after the worst of the coronavirus pandemic. South Korea is the world’s seventh-biggest luxury goods market according to Euromonitor, and the research firm estimates it was one of only two of the top seven markets by revenue – the other being China – to see sales grow last year from 2019 levels.
Supply at brands like Chanel, though, is tightly controlled, preserving exclusivity and boosting appeal with no online shopping option beyond cosmetics, perfumes and some small accessories. Such is the appetite in downtown Seoul that long queues form before dawn outside department stores as shoppers brace for what’s known as an ‘open run’ – a sprint to Chanel’s doors at opening time.
“I arrived … at 5.30 a.m. for an open run and I was notified that there were more than 30 people in front of me,” a shopper told Reuters in front of a Chanel boutique in Seoul. Speaking on condition of anonymity because of privacy concerns, he said by the time he entered the store – nearly 10 hours later – the item he wanted was sold out.
Reflecting such red-hot demand in the resale market, a Chanel medium classic flap bag was sold at 13.5 million won ($11,031) – 20% more than its standard retail price – in January on KREAM, a platform offering everything from sneakers to tech and luxury goods that is an affiliate of tech giant Naver Corp.
KREAM, an acronym for ‘Kicks Rule Everything Around Me’, was launched in 2020. It told Reuters its monthly transactions exceeded 100 billion won in December, and said South Korea’s resale market is worth more than 1 trillion won – nearly $820 million – even at the most conservative estimates.
While resale platforms like KREAM offer a range of brands, Chanel, like Swiss watchmaker Rolex, is a particularly sought-after brand because of its status among couples in South Korea as one of the most popular wedding gifts, and frequent price increases of its most iconic handbags.
Chanel increased prices of some handbags, accessories and seasonal ready-to-wear earlier this month in Asia and Europe, including by 5% in South Korea – where prices have just been raised for the fifth time in nine months, according to Chanel Korea.
In tandem with its screening for bulk buyers, Chanel said it has implemented a “queue management system”: Clients are asked to give their contact number and reason for visiting the store so that they can be informed via text messages when they will be able to enter the boutique.
Brand experts and consumers are divided on the impact of the new buying pattern on Chanel.
“Consumers are voluntarily doing free ads for Chanel – camping outside (boutiques), doing open runs, posting their experiences on social media,” said Lee Eun Hee, a professor of consumer science at Inha University.
“I think all those phenomena have helped Chanel draw younger customers and make a big chunk of money off it.”
Still, some consumers say long queues and waiting lists have put them off.
“I just gave up buying a Chanel product long ago,” said a Seoul resident in her 30s, declining to be named due to privacy concerns.
“It’s too difficult to buy one, with some 300 people usually on a waiting list, and by the time it’s my turn, there is no product left. This really puts me off and I don’t want to be at the centre of this craziness.”
Not giving up any time soon are the bulk buyer-resellers.
Speaking on condition of anonymity because of the sensitivity of the matter, some resellers told Reuters they’re hiring “line standers” for a fee of up to $125 a day to stand in queues or enter stores on their behalf.
One reseller in his 30s told Reuters he’s been reselling his purchases at usually more than 20% profit – and it can be far more profitable when inventory level is low.
He said he sold a Chanel flap card holder recently on secondhand marketplace app Karrot for nearly 1 million won, 40% above its retail price – five minutes after it went up for sale.
(Reporting by Heekyong Yang in Seoul and Silvia Aloisi in Milan; Editing by Miyoung Kim and Kenneth Maxwell)
Copyright 2022 Thomson Reuters.