During the economic boom of the late 1990s, Koreans developed a taste for things very expensive although unnecessary, and high-end clothes and accessories became ways to broadcast new wealth. As people say, timing is everything in business, and Lee Sang-kwon couldn’t have picked a better time to hop on the boom.
After finishing his military service in 1997, Lee went into business for himself, trading toys and other goods. He soon moved to luxury goods like handbags and watches, right when the population was developing a taste for lavish items imported from abroad. He then gave his business a tweak: he offered the goods second-hand for people who want the brand logo for less.
“It was the first time a lot of people really had money. Rain or shine, cold weather or hot weather, I’d be out on the street, handing out cards and trying to promote my business,” Lee said.
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Lee Sang-kwon takes a call from a prospective buyer looking for a hard-to-find luxury timepiece. Lee specializes in used luxury items, with three locations in Seoul. (Matt Douma) |
Every year since 2006, sales of luxury goods in South Korea have risen at least 12 percent to an estimated $4.5 billion in 2010. In the first four months of 2011, sales at department stores were up more than 30 percent compared to the same period in 2010.
According to a survey conducted by the McKinsey consulting firm, Koreans spend an average of 5 percent of household income on luxury. Japan is next at 4 percent.
Lee, now 38, is the owner of three luxury goods shops and a high-end Japanese restaurant in Gangnam, southern Seoul. His main store, which specializes in watches, is located in the “Luxury Zone” in Dongdaemun’s Doota Department Store, close to expensive coffee shops, an Italian restaurant and other symbols of South Korean prestige. He has come a long way from his first gig selling stuffed animals on the street.
The faces of Lee’s customers light up at the first glimpse of his impressive selection of luxury timepieces. His shops are popular with visitors from Hong Kong and Japan, as well as with South Koreans looking to get their hands on impressive goods at something of a discount.
Instead of buying straight from the major brands that dominate the luxury landscape, Lee traffics in used goods. His favorite items are watches, which he appreciates for the fine detail and artistry they exhibit. Fine watches can retain their value after purchase and sometimes even gain value. At the Dongdaemun outlet, the base price for a watch is 1 million won ($896). The most expensive is 200 million won.
Success didn’t slow Lee, but the demands of family have somewhat. He is married and has a newborn son. Dongdaemun is a night market, so Lee keeps a nocturnal schedule, arriving in the evening and working until late in the morning. “I used to work until I collapsed, but now I rest on weekends.”
When not overseeing his businesses, Lee can be spotted riding in his Porsche convertible or jet skiing on the Han River.
High-end items are sold at significant markups and yield large profits for merchants. Many customers go to great lengths to acquire the esteem that comes with the finer things the retail market has to offer. But of course not all of them can really afford such expensive items.
“Korea is an extremely status conscious place, so having a Louis Vuitton bag or a Rolex watch is deeply intertwined with one’s sense of self-worth and status relative to others. They consider it more of a necessity than a luxury somehow,” said Richard Meaders, a professor of international business at the Hankuk University of Foreign Studies.
And Korea is different from other markets for luxury goods. “In Europe, people buy luxury goods but the luxury is derived more from the quality of the workmanship. They’re willing to pay a premium for high quality performance measures. They don’t buy it simply because of the brand or simply because it’s expensive,” said Meaders.
These outlays on pricey items are contributing to growing debt in the country. South Korea has a household debt to income ratio of 155 percent, according to the Organization for Economic and Development, meaning the average South Korean household spends one and a half times what it brings in.
“There’s a pattern of fear and consumption,” said Baek Sung-jin, the head of the Finance Consumers Association, a civic group that provides counseling to people in financial crisis. “People are told by big companies that if they don’t have the right things no one will want to date them or be friends with them.”
Does Lee ever wonder if his customers are buying things they can’t afford?
“I don’t worry about that,” he said. “I know my customers very well, and I work with them to find what is right for them. The best item isn’t necessarily the most expensive one.”
South Korea’s status-conscious nature makes people uneasy about publicly discussing financial distress or questionable shopping habits. But this is the world’s most wired country and the internet gives South Koreans a chance to anonymously let loose their struggles with touchy subjects.
There are online support groups for people with financial trouble, some of which describe the peculiar way that luxury goods come into people’s lives. On Naver, a commenter using the name Hohosonyuh writes, “I had never been interested in luxury goods at all until I got married and other women would always ask me why my husband never bought me anything. My friends would say that they pitied me, that I deserved very nice things, that my husband must be very poor because he obviously can’t afford to buy me nice handbags.”
The lack of interest in luxury goods has apparently damaged this couple’s public standing.
She writes, “I feel guilty that now my husband has a reputation as someone who can’t afford to buy his wife nice things. I don’t buy expensive bags because I’m not interested in them. But no one believes me. They say I’m just making excuses for my poverty.”
(Yonhap News)
