Luxury goods sales fall as consumers pinched by rising expenses

The Korea Times

The Korea Times

Business

Sat, September 23, 2023 | 07:14

Companies

Luxury goods sales fall as consumers pinched by rising expenses

Posted : 2022-12-14 08:35

Updated : 2022-12-14 17:07

A show host sells luxury scarves on Tren:be's live YouTube channel on Sept. 22. Korea Times file

By Kim Jae-heun

A 32-year-old office worker surnamed Kim recently deleted all of the online luxury shopping mall apps on her mobile phone. She decided to cut her spending on luxury items and does not even want to be tempted by surfing the internet.

"The prices of milk, coffee, gasoline and delivery services have increased and they are necessary expenditures. To save money, the first expense I had to cut was shopping for clothes," Kim said.

A 41-year-old house wife surnamed Lee also stopped purchasing luxury goods from the second half of this year. Rising interest rates have nearly doubled the money she has to pay to finance her mortgage loan.

"I used to pay 500,000 won ($383.8) in interest for the loan every month, but after the rate jumped to the 6 percent range last summer, I have to pay about 1 million won now. There is no way I can spend money buying expensive handbags or accessories," Lee said.

With soaring interest rates and the Korean won's weakness against the U.S. dollar, more and more people are spending less money on imported luxury goods, adversely affecting online luxury shopping platforms that thrived during the COVID-19 pandemic.

Shopping platforms such as Balaan, Tren:be and Must It, which showed rapid growth during the pandemic last year, recently saw the number of shoppers decrease sharply.

Normally, demand for luxury items increase at the end of the year as people buy gifts for their family and friends. However, as living costs rise uncontrollably, more and more people are cutting down on luxury goods spending first, leading to a drop in the number of people visiting online shopping malls.

Tren:be saw the number of monthly active users (MAU) in November fall about 46 percent year-on-year to 370,000. During the same period, the MAUs of Must It and Balaan also decreased from 350,000 to 250,000 and from 560,000 to 480,000, respectively.

"Many online luxury shopping firms are on alert due to plunging MAU numbers these days. They are promoting various events and giving out discount e-coupons to retain their customers, but they have not been so successful until now," a source at a local luxury retailer said. "Companies are hoping for macroeconomic policies to ease for now, so people will be less pressured by the continued rise in living costs."

jhkim@koreatimes.co.kr