Luxury Brands Look to South Korea for China Sales Boost
To succeed in China, luxury brands are getting help from South Korea.
Korean style, from viral K-Pop videos to fried chicken, is all the rage in China and brands are increasingly using it to reach Chinese consumers.
The likes of Chanel, Gucci and Louis Vuitton have used product placement in Korean TV dramas to broaden their appeal to young consumers. The draw of Korean shows is so strong that Chinese producers are trying to make them, complete with Korean actors, so they can fill the sets with Chinese brands.
Korean sitcoms are particularly appealing to the fashion-obsessed young Chinese consumers. Since Korean drama 'My Love from the Star' raked in 34 million viewers in January, Celine dresses and Jimmy Choo shoes worn by Korean actress Jun Ji-hyun have seen big spikes in sales. More affordable items such as lipstick and hairbands are also selling well. The series even sparked a fried chicken and beer craze in China.
The impact has surprised marketers. Leo Suh, Samsonite's 1910. president of Asia and former Korea country manager, selected actor Kim Soo-hyun to endorse a new leather backpack partly because 'My Love from the Star' was airing at the time of the product's launch. After Mr. Kim wore the backpack in one episode, Chinese customers swarmed to stores with pictures of him on their phones. Sales of the entire backpack line took off, tripling in February from the same month last year.
Samsonite expects full-year sales of its backpacks in Asia to double to $60 million in 2014. Associating with young Korean stars has rejuvenated the 100-year old company and made it more glamorous, says Mr. Suh.
The rise of Korean pop culture isn't new. The term Korean Wave was coined by Chinese journalists in 1999 to describe the growing appetite for Korean culture exports. But Korean TV dramas have only flexed their commercial muscle recently. Executives at Coach Inc., the American leather goods company, lamented privately that they found out about the hit show 'My Love from The Star' too late and missed a product placement opportunity.
Korean dramas help fill a void of high quality original content in China. Despite Beijing's stated goal of developing a culture industry in its five-year plan, the entertainment industry remains relatively immature. The most popular shows mostly come from abroad.
Luxury brands often prefer Korean actors because they are cheaper to sponsor than Chinese and Hollywood stars. Still, big brands like Louis Vuitton and Samsonite didn't pay to place their products in 'My Love from the Star' because the show, eager to engage style-conscious young viewers, wanted them anyway.
Korean stars also have regional appeal. When LVMH MC. does a promotion in Greater China, it sometimes has to pick three different people for the mainland, Hong Kong and Taiwan. But Korean celebrities are well recognized from Singapore to Vietnam.
Yet the Korean wave is a double edge sword for big brands. Along with Korean pop culture, the country's cosmetics and fashion brands are increasingly popular, bringing new competition to global brands. Este Lauder blamed its sales fall in Korea last year partly on competition from domestic brands there, and Chinese consumers now go on tours to Seoul for the local fashion, and plastic surgery.
Despite these challenges in the Korean market, foreign companies need to stay there because of its influence over the rest of Asia. In September, spirits maker Diageo DGE.LN +0.08% opened a luxury 'Johnnie Walker House' store in Seoul. Korea is a big whiskey market, but Diageo didn't build a six-floor store just for locals. 'Korea is an influencer for luxury items and lifestyle experiences,' said James Lee, head of Johnnie Walker House Seoul. 'By investing in Korea, we are impacting consumers across Asia Pacific.'
尽管韩国市场竞争激烈，但外国品牌有必要在韩国继续投资，因为韩流继续引领亚洲时尚和娱乐业。去年9月份，英国的洋酒公司帝亚吉欧(Diageo)在首尔开设了一家奢侈的苏格兰威士忌体验店Johnnie Walk House。韩国本身是一个巨大的威士忌市场，但这座六层的体验店恐怕不只是为韩国当地人建的。Johnnie Walker House首尔店的负责人James Lee表示，韩国在奢侈品和生活时尚方面具有引领作用，所以投资韩国可以影响到整个亚太地区的消费者。