A survey released earlier this month reported that South Koreans, on average, own nine luxury items and purchase two more each year. Since 2006, Korea has seen its luxury market boom with an astonishing 12 percent (or greater) growth every year, uninterrupted. In 2010, Koreans spent roughly 5 trillion won on imported luxury goods, a figure that’s grown by approximately 10 percent each year since. During this same period, e-commerce has also taken off, accounting for a significant 13 percent of Korea’s annual retail sales (compared with 6 percent in the U.S.), totalling more than $1 trillion. Despite all of the recent growth in their luxury market, just 60 percent of the 95 global prestige brands examined in our new Digital IQ Index: Korea report currently host local sites in the country, and just 16 percent of those support e-commerce. As you can see in the graph below, other major luxury hubs in the region like Japan and China have significantly higher e-commerce penetration. Where Korea does shine compared to its regional peers is in its linking to third-party retailers. Nine brands link to Lotte.com, South Korea’s largest online retailer, which attracts nearly one million unique visitors each day and allows customers to pick up online purchases at any of its 15,000 stores.
If there is one industry that stands out for digital in Korea, it is definitely Beauty, taking eight of the top 10 spots in our Digital IQ ranking. International companies like Estée Lauder, Kiehl’s and M.A.C are all investing heavily in local Korean e-commerce, doing their best to break into the stronghold of domestic brands that presently account for an overwhelming 85 percent of the country’s Beauty sales. On Naver, the country’s leading search engine (70 percent market share), just 15 percent of the prestige brands we looked at take advantage of Naver’s community features, and two-thirds of those that do come from the Beauty world.
L2 emails keep you up to date on how brands are leveraging digital to grow their businesses.
Join Our EMail List