By Kim Jae-heun
What does Chanel and Louis Vuitton have to do to keep its customers loyal here? Raise prices frequently, never notify them about it and make them wait to buy leftovers. If the two fulfill corporate social responsibility (CSR), their customers will not be happy.
The luxury brands' "tyranny" in the local market is not a new trend and it has been making headlines in newspapers occasionally.
Korea is the eighth largest luxury market in the world after America, Japan, China, France, Italy, England and Germany. According to researcher Euromonitor International, the local luxury market has been growing an average 6.5 percent annually since 2013 and its size was estimated at 13.29 trillion won ($10.76 billion) in 2017.
Counting only the luxury bag market, Korea has already beaten France, the country of origin of most of the brands.
Though, luxury brands seem to never want to give in return.
When the government indicated it would revise a law to allow the Financial Service Commission to look into international firms' account books, the majority including Louis Vuitton, Gucci and Prada changed their listings into limited companies, in 2012, 2014 and 2016, respectively.
When Chanel entered the Korean market in 1991, it was established as a limited company. The same goes for Hermes.
Under this corporate structure they never had to reveal how much revenue they make, how much tax they pay, how much in dividends they give to investors and how much they donate to charities here.
In the case of Louis Vuitton, the last time it revealed management information, in 2011, it had 497.4 billion won in revenue and a 57.5 billion won operating profit in Korea. Its net income recorded 44.9 billion won and it transferred 90 percent ― 40 billion won ― to its head office in Paris.
Meanwhile, it only spent 211 million won on charity, or 0.52 percent of its net income. In the previous year, Louis Vuitton spent 58.5 million won, or 0.13 percent of the 44 billion won it sent to Paris.
When The Korea Times asked Louis Vuitton Korea about donations it had made, the company said it was against the head office's policy to reveal any information related to its business activities.
Instead, Louis Vuitton Korea said it had started selling a new "UNICEF Silver Lockit Bracelet" designed by creative director Virgil Abloh, and donates $100 to the humanitarian organization for each sold.
The bracelet is sold for 530,000 won here ($429). The fashion brand makes a 76.3 percent profit on the "charity program" it introduced while it refers to its goodwill of fundraising for children in need.
An industry source said this is an improvement compared to Louis Vuitton's CSR activity in the early years.
Chanel Korea's recent controversial price-hike that raised concern over cluster infections of COVID-19 after hundreds of people gathered to purchase luxury goods showed it has no interest in Korean customers' health issues.
A few days after hundreds of clubbers were infected by the virus in the internationally-influenced district of Itaewon, Seoul, in early May, information came to light that Chanel was going to increase the price for its luxury items.
Although the country was concerned by another massive outbreak of the new coronavirus after the Shincheonji incident in Daegu Metropolitan City in late February, Chanel did not show any concern for people lining up in front of its stores for three hours, who were not keeping the 1.5 meter social distance and wore face masks improperly.
The queues lasted for three days and Seoul City warned that it could review giving an administrative order to stop the operation of the boutiques in the capital over such an incident.
Nobody was confirmed with a COVID-19 infection as a result of the queues, but stores provided no countermeasures when the issue surfaced.
Chanel Korea kept to its policy of "we cannot reveal anything due to instructions from the head office in Paris."
When Chanel was witnessing a sudden plunge of sales due to COVID-19 closing down many of its factories and ateliers worldwide, it took instant action to increase prices. But when it saw local customers' health at stake over a possible cluster infection while waiting in the line, it didn't do anything but play dumb.
Reuters reported that Chanel had to increase the price due to the rising cost of materials used to manufacture its products, but the French brand failed to explain why it has delayed its repair service indefinitely starting from April.
Also, a luxury industry source said Chanel and Louis Vuitton are increasing prices here more frequently to cover losses recorded in other countries.
"The luxury brands are witnessing a decline in sales of their product worldwide except for Korea where an increasing number of young customers are buying products despite the price hike," a source said.
Luxury industry to face 'new normal' momentum
Luxury brands have long been sticking to their sales tradition of inviting customers to their offline stores and make them try various items to purchase on site.
However, the contactless trend has pushed many fashion brands to do their business online and COVID-19 has hastened the transitional shift of shopping behavior.
Chanel and Louis Vuitton have opened their official online malls in 2018 but they still prevent private retailors from selling their products online.
According to the consulting firm Bain & Company, COVID-19 has already affected the luxury industry hard resulting in a drop of $300 billion in sales worldwide.
"Chanel and Louis Vuitton are not exceptions to this and they have to make changes if they don't want to lose their loyal customers. Considering how much they are making in the Korean market, they have disregarded local customers in various ways from frequent price hikes to poor customer service. Though, the two brands will continue to take Korean customers for granted if they don't complain about the un-customer-friendly treatment," the source said.