Luxury brands including Balenciaga and Ferragamo are seeing falling profits in Korea as savvy consumers increasingly buy luxury items directly from overseas or during outlet sales.
According to filings with the Financial Supervisory Service, several companies saw significant decreases in profits in 2016.
(Yonhap)
Ferragamo Korea’s operating profit fell 12 percent on-year to reach 5.9 billion won ($5.2 million), while Fendi Korea’s operating profit fell 11 percent.
Dior suffered losses coming to 8.3 billion won, while Balenciaga suffered losses of 3.6 billion won due to rising labor costs and rent.
Industry sources said that the losses may have been caused by consumers’ shift toward buying products directly from overseas rather than in Korea.
According to Statistics Korea, direct overseas purchases grew 12.1 percent on-year in Korea in 2016 to reach nearly 2 trillion won. Of those purchases, fashion and accessories made up the largest category.
Some consumers choose to rent luxury products or buy used products instead. Reebonz, a luxury-focused fashion direct sourcing platform, rolled out a new service last year, allowing consumers to rent luxury bags instead of purchasing them.
Used luxury product stores, such as Gugus, are also gaining popularity as consumers look for ways to buy luxury products at lower prices.
Meanwhile, distributors said that the numbers may be skewed toward certain brands.
“Sales of luxury items are holding generally steady, but we are seeing certain brands that are bringing in significant portions of total revenue,” said a spokesperson for a department store.
The spokesperson highlighted Gucci as an example, saying that sales have been increasing significantly for the brand here for two years.
Brands such as Bottega Veneta and Yves Saint Laurent also showed growth in 2016, according to filings. Bottega Veneta saw a 34 percent on-year increase in operational profit, while Yves Saint Laurent Korea enjoyed a 49 percent rise in operational profit.
By Won Ho-jung (hjwon@heraldcorp.com)