Luxury Labels Squeeze Captive Korean Customers

Luxury labels are making exorbitant demands of customers in Korea, who remained hopelessly addicted to their products throughout lockdown.

Customers not only have to wait in long lines for the privilege of giving money to the businesses but must buy millions worth of goods to "unlock" access to others.

Mostly the strategy is to create a false scarcity that makes the bling even more desirable. "I was told I need to spend another W3 million if I want to buy a W2.45 million handbag. Did I hear that right?" wrote one member of an online community that brings together more than 600,000 label addicts (US$1=W1,265).

French luggage and leather goods maker Goyard made headlines last year when Korean customers had to wait several months to get their hands on the popular Bohème bags due to a shortage of inventory, and it limited access to customers who spent at least W3 million a year there.

Other labels are adopting similar tactics. Louis Vuitton, Chanel, Dior and many others now ask customers to pay the full price first just to get on the waiting list if they do not have inventory in stock.

Dior recently hiked prices and informed customers that it would cancel their orders if they failed to pay the difference in advance. To thwart touts, who do lively business here by snapping up products on the day of their release and then resell them at a premium, Chanel limited purchases of popular products like the classic Flap Bags to one per customer per year.

Cartier also triggered controversy by canceling orders from customers who placed them before prices were raised. When hundreds of angry customers phoned the company to complain, Cartier relented and blamed a "system error." Hermès caused an uproar early this year for the same reason and the same excuse was trotted out. "There was a system failure due to a flood of orders," a staffer claimed.

But the sharp practices are likely to continue as long as there are slavish devotees to put up with them. According to Morgan Stanley, Koreans bought US$16.8 billion worth of luxury goods last year or $325 for every man, woman and child in the country, the highest in the world. That is more than the U.S. ($280) and China ($55).