Department stores’ luxury sales expand 20%

Koreans’ desire for luxury goods doesn’t appear to be waning, with high-end fashion brand sales at the nation’s major department stores soaring almost 20 percent last year.

According to the Ministry of Knowledge Economy on Thursday, the nation’s top three department stores Lotte, Shinsegae and Hyundai saw their luxury goods sales surge 19.8 percent last year.

The figure is up from 12.4 percent in 2010 and more than double the average sales growth of 8.9 percent among the three retail chains last year.

“Coupled with the recovery of consumer sentiment that the economic slowdown has hit bottom, the wealthy drove up overall luxury sales, while upper middle-class spending expanded,” said a report by Daewoo Securities.

“During the first to third quarters, the growth rate reached 23.8 percent.”

Industry watchers say that the growing trend could continue for some time, despite possible fluctuations depending on the economic situation.

“Luxury spending would continue exploding in the coming years,” said Park Jong-ryeol, an analyst with HMC Investment & Securities. “Even though a slowdown is expected following the widening financial crisis in Europe, the sales growth would more than double that of department stores.”

In Korea, department stores are the main sales channel for foreign luxury brands as their more than 80 percent of outlets are located there. The retailers and brands would not reveal the exact number, but industry sources say luxury sales could make up 15 to 20 percent of their total sales.

Some experts, however, were skeptical about the constant growth, citing the Japanese luxury market as example, where sales started to decline in 2006 as the market reached saturation.

“Most brands in Korea are seeking sales growth by increasing product prices rather than expanding the number of sales counters. Their growth could be limited,” said Lee Sang-koo, a researcher at Hyundai Securities.

By Lee Ji-yoon (jylee@heraldcorp.com)