A Gugus store in Hannam-dong, Seoul (Image courtesy of Gugus)
SEOUL, Apr. 15 (Korea Bizwire) — Despite a significant drop in sales for major online luxury goods platforms in South Korea due to the economic downturn, the pre-owned luxury market has shown resilience, even setting a record transaction volume last month in line with the start of the new school year, industry data showed on April 14.
According to filings with the Financial Supervisory Service, the three leading online luxury platforms — Must It, Trenbe, and Balaan, collectively known as “Mutbal” — all reported operating losses in 2022.
Trenbe’s revenue plunged 54.5 percent year-over-year to 40.1 billion won, while Balaan saw a 56 percent drop to 39.2 billion won. They posted operating losses of 3.2 billion won and 9.9 billion won, respectively.
Must It’s sales declined 24.5 percent to 24.98 billion won, resulting in an operating loss of 7.8 billion won.
“Online luxury shopping and platforms gained popularity during the COVID-19 pandemic due to the contactless shopping trend,” said a retail industry official.
“However, as the virus became endemic, more consumers opted to buy luxury goods during overseas travels, while high inflation also dampened spending, leading to the sharp sales decline.”
Excessive marketing spending through celebrity endorsements and TV advertisements intensified a “bleeding competition” that strained the platforms’ finances. Their combined advertising expenses in 2022 totaled over 66 billion won.
Must It reported its pre-owned luxury sales have been increasing by 10-20 percent on an annual basis. (Image courtesy of Must It)
Facing red flags, the companies have since slashed marketing budgets, cut personnel costs, and even sold office buildings to improve liquidity and financial health. Their combined advertising spend dropped to around 16.6 billion won last year.
CatchFashion, once the fourth-largest luxury platform, ceased operations in March due to financial troubles.
In contrast, the pre-owned luxury goods market showed vitality during the economic slump.
Gugus, which operates 26 offline stores near department stores, reported a 20 percent year-over-year increase in its gross merchandise value to 215.3 billion won in 2023. For the first quarter of this year, the figure grew 16 percent from a year earlier to 62.4 billion won.
Chanel topped Gugus’s brand sales last year, followed by Hermès, Rolex, Louis Vuitton, and Cartier. By category, handbags accounted for 48 percent of transactions, followed by watches at 19 percent, jewelry at 13 percent, clothing at 11 percent, and shoes at 4 percent.
The resale market’s resilience reflects both consumers seeking cash by selling luxury items and those hunting for discounted premium goods during tough economic times.
A new 2023 Hermès Kelly 28 bag, typically priced around 15 million won, fetches over 20 million won on the resale market due to scarcity.
A Chanel Caviar bag priced around 15 million won sells for around 8 million won pre-owned on average.
“Overall pre-owned luxury transactions, including handbags, peaked in March, likely driven by the start of the new school year and parent-teacher meeting seasons as our core customers are in their 30s to 50s,” a Gugus official stated.
The luxury resale segment has also grown for online platforms annually. Must It reported its pre-owned luxury sales have been increasing by 10-20 percent on an annual basis, with a 20 percent rise in the first quarter of 2023.
“Despite the economic slump, major high-end brands like Hermès, Louis Vuitton, and Chanel raised prices early this year, fueling demand for more affordable pre-owned luxury items,” said a Must It official.
Ashley Song (ashley@koreabizwire.com)
