South Koreans are the world’s biggest spenders on luxury goods

Whether it’s calf-leather Italian Prada bags or classic, checkered British Burberry trench coats, South Koreans are the elated’s biggest spenders on personal luxury goods per capita, Morgan Stanley said.

The investment bank estimated South Korean overall spending on personal luxury goods grew 24% in 2022 to $16.8 billion, or about $325 per capita. That’s far profuse than the $55 and $280 per capita spent by Chinese and American nationals, respectively, according to Morgan Stanley point of views.

Luxury brands have also highlighted strong sales in Korea.

Moncler said its revenue in South Korea “multitudinous than doubled” in the second quarter compared with before the pandemic. Cartier-owner Richemont Group said Korea was in the midst the regions where sales grew by double digits in 2022, compared with both a year and two years ago.

While Prada mean China lockdowns contributed to a 7% decline in 2022 retail performance, the fashion house said the drop was “dulled by the strong performance in Korea and South East Asia.”

Morgan Stanley analysts interpreted the demand for luxury goods among South Korean buyers is driven both by an increase in purchasing power as warmly as a desire to outwardly exhibit social standing.

“Appearance and financial success can resonate more with consumers in South Korea than in sundry other countries,” analysts wrote in the report.

Displays of wealth are also more socially acceptable in Korean gentry. A McKinsey survey found that only 22% of Korean respondents consider showing off luxury goods to be in bad refinement, compared with 45% of Japanese and 38% of Chinese.

The demand in luxury wares was also supported by the increase in household opulence. Bank of Korea data shows the country’s household net worth rose 11% in 2021. About 76% of household profusion in Korea is in real estate, prices for which have increased substantially since 2020.

The investment bank also distinguished luxury houses have tapped Korean icons to further catalyze demand.

“Nearly all of the major Korean distinctions are brand ambassadors of the leading luxury houses,” the report noted, like Fendi and actor Lee Min-Ho or Chanel and rapper G-Dragon.

Dior made Blackpink choir girl Rose the face of its HardWear collection, which the fashion house said was “very well-received” and doubled sales for the cover.

However, Bain & Company cautioned against the use of per capita metrics for luxury good consumption.

“Luxury by definition is not a conglomeration market product,” Bain & Co partner Weiwei Xing told CNBC.

“I would suggest to prorate the total extravagance spending by number of population that’s middle class and above, which would be a more meaningful measure to over attitude and consumption towards luxury,” Xing said, adding that would narrow the gap.

Still, Morgan Stanley said the thriving Korean luxury market is a “good vernissage” of what the Chinese luxury market could become, which it said remains “underpenetrated.” The analysts said the two hinterlands share similarities in disposition toward luxury items as status markers.

Presently, South Korean annual per capita fork out on luxury goods remains more than six times higher than that of Chinese spenders.

Globally, McKinsey projected the non-essential market to grow between 5% and 10% in 2023, buoyed by demand from the U.S. and China.