Chinese shoppers in South Korea shun luxury for local brands

Amorepacific

05/02/2016 24:30

* Louis Vuitton, Chanel surpassed at big duty free shops 
    * Share of younger Chinese visitors on the rise 
    * Retail spending per Chinese visitor declines 
 
    By Minwoo Park and Joyce Lee 
    SEOUL, Feb 5 (Reuters) - Chinese visitors to South Korea are 
buying less from global luxury mainstays like Louis Vuitton and 
Chanel in favour of cheaper homegrown brands, as young, 
independent travellers make up a bigger share of tourists. 
    Lured by the "Korean Wave" of culture exports, from soap 
operas and K-pop music to food and fashion, price-conscious 
younger Chinese visitors are seeking a more authentic and less 
expensive shopping experience. 
    South Korea trails only Thailand as an overseas destination 
for Chinese travellers, whose heavy retail spending has helped 
make South Korea the world's largest duty free shopping market. 
    The emphasis on value will put further pressure on global 
luxury retailers already grappling with slowing sales in China 
after years of skyrocketing growth, as a government crackdown on 
graft and lavish spending bites. 
    "You can buy those big brands everywhere, and it is actually 
cheaper to buy those brands in other countries compared to the 
prices in South Korea," said 21-year-old Zhu Xin, who was 
shopping at the Stylenanda store in Hongdae, a Seoul 
neighbourhood popular with young adults.  
    "Now that we are here, we should buy local brands," she 
said. 
    Average prices on best-selling items from global luxury 
brands in South Korea are cheaper than they are in mainland 
China, but still cost more than in Europe, Singapore and Dubai, 
according to HSBC data.  
    At downtown Seoul duty free shops run by Hotel Lotte's 
 HTLOT.UL  Lotte Duty Free and the Samsung Group's Hotel Shilla 
 008770.KS , LG Household & Healthcare's  051900.KS  Whoo and 
Amorepacific's  090430.KS  Sulwhasoo cosmetics were the 
top-selling brands in 2015, overtaking Louis Vuitton  LVMH.PA , 
Chanel and Richemont's  CFR.VX  Cartier, store data shows. 
    "This doesn't necessarily imply that luxury retailers have 
to launch cheaper stuff but it does necessarily imply that they 
have to be more relevant at every price point," said Erwan 
Rambourg, an analyst at HSBC in Hong Kong. 
    The number of Chinese tourists to South Korea dipped 2.3 
percent in 2015 to about 6 million due to the deadly Middle East 
Respiratory Syndrome (MERS) outbreak. However, brokerage CLSA 
says Chinese inbound traffic growth rebounded from September and 
should jump by 28 percent in 2016. The South Korean government 
expects a record 8 million Chinese visitors this year. 
     
    NEW GENERATION 
    Chinese tourists to South Korea are getting younger: the 
share of those in their 20s and 30s rose to 46.1 percent last 
year, from 40.9 percent in 2013, according to the government-run 
Korea Culture and Tourism Institute.  
    While older Chinese tourists typically travel in groups 
where they are ferried between shops catering to them, Chinese 
millennials tend to be better-informed about what they want, 
travel independently and spend less on shopping. 
    "I use my mobile phone to research what products to buy in 
South Korea," said 20-year-old Chinese tourist Liu Yuting. "Many 
Chinese girls like South Korean products, because most of them 
are cheap and cute." 
    At Lotte Department Stores, a chain owned by Lotte Shopping 
Co Ltd  023530.KS , average spending per Chinese visitor fell to 
500,000 won ($412) in 2015 from 900,000 won in 2013, although 
the surge in overall visitors made up the difference, an 
official with the chain said. 
    "Whereas past generations blindly purchased luxury goods, 
the younger generations have a more price-conscious consumption 
pattern," KB Investment & Securities analyst Yang Ji-hye said.   
    ($1 = 1,214.6000 won) 
 
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Chinese tourist destinations in Asia    http://reut.rs/1WNsskR 
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 (Additional reporting by Farah Master in HONG KONG; Editing by 
Tony Munroe and Stephen Coates) 
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters 
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUTHKOREA CHINA/TOURISTS