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Luxury brands

Behind Korea’s bizarre running competition for Chanel bags

Yes, people in Korea wait overnight and do run at department stores in the hopes of grabbing that latest Chanel bag

By The Wall Street Journal Jun 08, 2021 (Gmt+09:00)

A long line of customers waiting outside the Louis Vuitton store of Lotte Department Store main branch
A long line of customers waiting outside the Louis Vuitton store of Lotte Department Store main branch

In South Korea today, running has become an inseparable part of everyday life, particularly at a place where you would least expect to see a large group of sprinters: the department store.

Last Friday, around 5 a.m. in front of the Shinsegae Department Store’s main branch in Myeong-dong, people with foldable fishing chairs started to arrive one after another. They were all here for the same event, the so-called “open run”, the freestyle sprint to buy luxury goods as soon as the stores open in the morning.  

Kim Joong-do is a 56-year-old night-time worker who is also an “open run” professional. After his late-night shifts which end at 4 a.m., he tours around six department stores across Seoul every day.

“I only go to Chanel. If I succeed in buying a Chanel bag, even a small one, I still make 300,000 won ($270) by re-selling it in the online market,” said Kim.

The consumers going for an \
The consumers going for an "open run" (Courtesy of Yonhap News)

The scenery in front of the Lotte Department Store’s main branch, located just down the road from its competitor’s head branch, was not too different. An office worker in her 30s said she has been waiting before sunrise for the “open run” to the Chanel store at Lotte.

Another woman in her 60s told that it was her fourth try lining up so early in the morning to get the Rolex watches she wants to give to her son and prospective daughter-in-law as their wedding gift.

Such an unprecedented craze about high-end luxury items has skyrocketed luxury brand sales at the country’s top-three department stores.

According to Hyundai, Lotte and Shinsegae department stores, the revenue from selling luxury goods in April and May increased by 49-56% compared to the same period last year. The growth figure in last April and May versus the same period of 2019 was only 16-28%.

Now it is common to see long standing lines in front of the luxury brand stores such as those of Chanel, Hermes and Rolex. The lines, which have formed since the summer of last year on every day of department store operation, is still here with the Korean citizens today in June 2021.

With such a phenomenon, line sitting is now considered a lucrative side job in Korea. Some have become part-time line standers. They receive 100,000 ($90) won per round and up to 300,000 won ($270) when including the success fee in case they bought the item that the client wanted.

“This game is not about what you buy. Rather, it’s all about what you ‘can’ buy. Most of the time the item is already out of stock. It depends all on your luck, or fortune of the day,” said a part-time line stander waiting in front of the Shinsegae Department Store.

He added that he succeeded in getting the first-number queue ticket for the Chanel store on that morning, after having waited in front of the store from 8 p.m. of the previous day.   

“The number on my queue ticket is only 27,” said another part-time line sitter who arrived around 6 a.m. Around 50 people were gathered in front of the department store by 7 a.m. The number went up to 105 for those who arrived at 10 a.m.

Those waiting at the very front of the 200-meter “open run” line happened to be the re-sellers. They are the ones who buy Chanel bags at the retail price and re-sell them when the market price goes up due to the scarcity of certain models.  

“The bags have a high resale value. Chanel’s Classic Caviar Medium bags are now traded at a price 1-2 million won ($900-1,800) higher than the retail price,” said a re-seller waiting in the line.

Chanel Classic Caviar Medium Flap Bag
Chanel Classic Caviar Medium Flap Bag

Around 11 a.m., the re-seller and his co-workers hopped on the bus to Apgujeong, where a Hyundai Department Store is located, following the hearsay that the Apgujeong branch will have some Classic Medium bags for sale on that day.

“I actually set up my own re-selling enterprise recently,” he added.

The customers in South Korea can purchase only one bag of Chanel’s Classic line every year. The re-sellers say that such policy helps maintain the high resale value of the brand’s Classic bags.

They also note that high liquidity is another factor that makes the luxury brand products attractive. The re-sellers share the conviction that the luxury items can be turned into cash almost any time when they want.  

Those standing behind the re-sellers in the 200-meter line were those who were buying for their own purposes.

“My husband said he is going to buy me a bag for our fourth wedding anniversary. If I can’t find the bag I want, I am going to buy whatever bag they have anyway!” said Lee in her 30s.

REACTIONS BY THE LUXURY & DEPARTMENT STORE INDUSTRIES

South Korea has now become the seventh-largest market for luxury brand items sized at around 13.9 trillion won ($12.5 billion) last year, surpassing Germany, according to a report by Euromonitor International.

“This is unprecedented. I’ve never seen this level of fever for luxury brands before in Korea,” said a luxury brand industry official with more than 20 years of career.

The Korean market grew during the pandemic whereas those of the major Western countries and Japan saw on average a 20% shrink of the market.

“The Koreans are buying almost every item we have, from steady sellers to the latest trendy ones,” said an industry official who recently launched a new watch brand in the country.

The unprecedented interest in luxury items is giving a nod to more frequent and more drastic price hikes. The luxury brands had previously raised their retail prices only annually or biennially at a rate of 5-6% each time. But now they are raising the prices about four times a year at a 10% rate. Some customers have started hoarding the items before the price increase.

“Unlike other items, the luxury goods have few substitutes. That’s one of the reasons why the customers keep buying our products even after the price tag has been changed,” said a luxury brand representative.  

The department store operators are reacting swiftly, too, by analyzing customer data and devising relevant sales growth strategies.

“Prior to the pandemic, the main group of customers were in their 30s and 40s. Now the fever is led by those who are younger, in their 20s and 30s. We expect the market to grow even larger, considering the deep-rooted Korean culture of being conscious about how others think and what others have,” said a luxury goods merchandiser working at a major department store.

VARIOUS VIEWS OF THE EXPERTS

In the US, right after the Sep. 11 attacks in 2011, the expenditure on jewelry, watches and luxury cars rebounded faster than any other industry. A group of researchers at the University of Pennsylvania analyzed that a strong sense of self-love is manifested following the events of crisis, such as terrorist attacks or pandemics, driving people to spend more.    
The experts in Korea also note that there are psychological, social as well as demographic factors that must be examined in detail to understand the phenomenon over the luxury items.

South Korea is globally known for having a highly competitive society. The Korean people, in general, also like to show off about many different aspects of life, including what they possess. Industry officials note that such is the reason why the luxury goods market has been growing at a steady rate for the past few decades.

(Graphics by Jerry Lee)
(Graphics by Jerry Lee)

Experts note that the difference now is that we have a whole new generation of consumers entering the scene, the Millennials and the Generation Z, shortened in Korea as the “MZ Generation.”

These MZ consumers, the experts say, represent a new type of Korean citizens who have completely lost hopes in buying their own houses. The prior generations, granted that they worked hard and saved much, could buy their own houses after working for a decade or two.

But now, with the country’s housing price described as “nothing but crazy” by the media, politicians as well as the average citizens alike, the experts highlight that the hopes lost in the real estate segment are ironically funneling the MZ consumers’ basic human desire for security and social status into the luxury goods market.

“The luxury goods reflect the South Korean’s high emphasis on social equality. The MZ generation wants to be on equal grounds with the rest of the society by purchasing what the others have,” said a fashion industry representative.

The industry figures also depict the fast rise of the MZ generation as a major spending group. According to Hyundai Department Store, 45.2% of those who bought luxury items in April and May this year were the MZ customers. The figure was only 25.6% during the same period two years ago in 2019.

South Korea’s YouTube community, considered as a yardstick for the country’s latest cultural trend, is also full of clips by teenagers and those in early 20s unboxing and evaluating the luxury brand items they bought.

The term “flex” or “flexing”, originally coined in the US in the 1990s among the hip-hop musicians boasting their fast-gained wealth, is now a commonly used word among the youth in Korea as well.

Pop culture experts say that the idea of “flexing”, combined with the global trends of YOLO (you only live once) and FOMO (fear of missing out), can provide a comprehensive answer to why the South Korean youngsters are becoming obsessed with the luxury items.

“It’s difficult to get any attention or recognition among friends if I don’t have any luxury item,” said a teenaged consumer.

Others note that the country’s different groups of consumers are all virtually being forced to spend money within the country due to the ongoing international travel lockdown.

“As people can’t travel overseas, including their honeymoon trips, they are spending more to get luxury items here in Korea,” said a major department store representative.  

A psychology expert stated that the phenomenon over the luxury items can be categorized as an example of South Korea’s culture of collectivism.

“The South Koreans, living in more of a collectivistic society than an individualistic one, feel more comfortable when they have a sense of belonging. Such culture quickly drives fashion and food trends to spread nationwide. The idea is basically the same for the luxury goods,” said Professor Gwak Geum-ju of Seoul National University Department of Psychology.

The professor added that South Korea is also a highly materialistic country.

“Here, people tend to judge others by how they look and what they have. In France, the middle class is defined based on your ability to play any musical instrument, speak a foreign language or cook different cuisines. But here, we define our middle class simply by house ownership and the amount of cash in our savings accounts,” added Gwak.  

“The craze over the luxury items can be described as the self-portrait of the country that values people’s looks and their materials over anything else.”

K-POP STARS GIVING ANOTHER REASON TO BUY

Industry experts note that teenagers and those in their 20s are further exposed to the charm of luxury brands due to their close association with the top K-pop celebrities.

According to the industry on Jun. 7, a total of eight global luxury brands have appointed K-pop stars as their brand ambassadors.

BTS Jimin in his Louis Vuitton pullover sweatshirt
BTS Jimin in his Louis Vuitton pullover sweatshirt

The global sensation BTS was appointed as Louis Vuitton’s official ambassador in April, whereas Chanel’s official ambassadors include Jennie of Blackpink as well as G-DRAGON.

Jennie’s fans call her a “Human Chanel” because of her open fondness for Chanel’s items. She has been Chanel’s ambassador since 2019.

Blackpink Jennie and her Chanel garment
Blackpink Jennie and her Chanel garment

Gucci’s ambassador is IU, a female artist who enjoys popularity across all generations in Korea.

The famous singer-songwriter IU is Gucci's brand ambassador
The famous singer-songwriter IU is Gucci's brand ambassador

In the Korean YouTube scene, videos like a middle school student unboxing Chanel Mini Bags, which cost more than 2 million won ($1,800) apiece, are still gaining a large number of views.

“The parents in the past came here to buy high-priced windbreakers or padded jackets. Now, they are here for a pair of Gucci sneakers. That’s the difference,” said an official of a major department store.

Write to Jun Sul-li, Bae Jeong-Cheol and Min Ji-hye at sljun@hankyung.com

Daniel Cho edited this article.

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