Editor’s Note
This article highlights a significant surge in domestic luxury sales, driven by shifting consumer patterns and favorable exchange rates. The trend underscores a notable pivot from overseas and duty-free spending to local department store channels.
Sales of luxury brands like ‘Bulgari’ and ‘Van Cleef & Arpels’ at domestic department stores hit a record high last month. Major department stores handling luxury goods, such as Shinsegae Department Store and Lotte Avenue L, which house these brands, also experienced their peak boom. This is the result of improved domestic consumer sentiment and high exchange rates, allowing department stores to absorb some of the demand from duty-free shops and overseas consumption.
According to Hankyung Aicel on the 21st, among 20 luxury brands tracked for credit card payment amounts, 14 sold more in November compared to the previous month and the same month last year.
Bulgari, an Italian jewelry brand under LVMH, recorded an estimated department store payment amount of 30.7 billion won last month. This represents a sharp increase of 165.7% compared to the same period last year, marking the highest monthly figure since tracking began in 2018. Tiffany, another LVMH jewelry brand, also saw a 74.8% increase to 22.4 billion won.
Van Cleef & Arpels, a French jewelry brand under the Richemont Group, also saw its payment amount surge 87.5% to 28.5 billion won, a record high. Cartier increased by 38.6% to 39.8 billion won, and British brand Burberry rose 32.7% to 23 billion won. Additionally, sales in November for brands including Gucci, Balenciaga, Boucheron, Saint Laurent, Tiffany, Ferragamo, and Prada all increased compared to both the previous month and the same month last year. Hankyung Aicel estimates payment amounts based on data from approximately 20 million domestic credit card members.
Experts analyzed that the improvement in the Consumer Sentiment Index (CCSI) and rising asset prices such as stocks and real estate led to the luxury market boom. The November CCSI recorded its highest level in eight years since November 2017 (113.9). The KOSPI index also hit an all-time high this year, surpassing the 4,000 mark.
Consequently, department stores handling luxury goods experienced peak prosperity. The amount domestic consumers paid by card at Shinsegae Department Store last month was tallied at 819.4 billion won. This is an 18.9% surge compared to November last year, setting a historical record. The card payment amount at Lotte Shopping’s luxury mall, Lotte Avenue L, also jumped 9.7% during the same period to a record 67.4 billion won. Hyundai Department Store’s sales also increased by 8.7% to 276.5 billion won. According to the Ministry of Trade, Industry and Energy’s trends by department store item, sales of ‘overseas famous brands’ surged 19.5% last October, driving the overall department store sales growth (12.2%).
Distribution industry experts predict that department stores will continue to show higher growth rates next year compared to duty-free shops, large marts, and e-commerce. This is because foreigners, whose purchasing power has improved due to the high exchange rate, are also emerging as big spenders at domestic department stores.
According to Kiwoom Securities, foreign spending at department stores this year is expected to increase by about 30% compared to last year, accounting for 4-5% of total sales.
Unlike department stores, the structural downturn in duty-free shops is deepening. According to the Korea Duty Free Shops Association, domestic duty-free shop sales from January to October this year amounted to $7.3 billion (approximately 10 trillion won). This is a sharp decrease of 16.6% compared to the same period last year. Even considering the year-end special demand, the annual market size this year is expected to hit its lowest level in ten years since 2015 (approximately $8.1 billion). This is because the proportion of Free Independent Travelers (FIT) has increased, diverting consumption activities outside duty-free shops, while key customers like Chinese ‘bag traders’ (daigong) and group tourists (youke) have decreased.
Domestic sales, which account for about 20% of duty-free shop revenue, are also steadily declining. The domestic card payment amount at duty-free shops operated by four major domestic distribution companies—Hotel Shilla, Lotte Shopping, Shinsegae—was 104.9 billion won last month, a 13.0% decrease. Furthermore, concerns are growing about a slowdown in the outbound travel demand of domestic consumers, which forms the basis of duty-free shop sales. The credit card payment amount for four domestic low-cost carriers (LCCs) last month was 148.2 billion won, a sharp 42.8% drop compared to the same period a year ago. This is the result of excessive price competition to capture insufficient passenger demand relative to routes.
According to Seoul Money Brokerage Services, the won-dollar exchange rate this month reached the 1,470 won range, recording the highest monthly average since February 1998 (1,623.06 won) during the foreign exchange crisis.
