Luxury Brands Look to Korea for China Sales Boost

22-Mar-2014 Intellasia | The Wall Street Journal | 6:00 AM Print This Post

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.HK +2.15 percent 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 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 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., COH -0.52 percent 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. Even one of China’s top seven Communist Party leaders weighed in on the issue earlier this month: Wang Qishan, head of the Central Commission for Discipline Inspection, said Korean shows have done better than domestic TV dramas at promoting traditional Chinese culture. That is probably because Korean soap operas make family values more appealing by wrapping them in designer clothing and cool gadgets.

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.FR +0.78 percent 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 recognised 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. Estee Lauder EL -0.82 percent 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 percent 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.”

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Category: Korea

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