Brands are Looking to Korea for Growth & Korea is Looking Right Back

Image: Chanel

Brands are Looking to Korea for Growth & Korea is Looking Right Back

Western luxury brands have been looking to the Asian Pacific region rather relentlessly as a hotbed for growth. The Chinese consumer, in particular, has become wealthier and more accepting of Western retail formats since luxury brands began investing in the Chinese market, with ...

June 9, 2017 - By TFL

Brands are Looking to Korea for Growth & Korea is Looking Right Back

Image : Chanel

Case Documentation

Brands are Looking to Korea for Growth & Korea is Looking Right Back

Western luxury brands have been looking to the Asian Pacific region rather relentlessly as a hotbed for growth. The Chinese consumer, in particular, has become wealthier and more accepting of Western retail formats since luxury brands began investing in the Chinese market, with Louis Vuitton, Bally, Gucci and Ferragamo among the first wave of retailers to open outlets in China more than 10 years ago. However, with the changing tides of consumption and luxury spending and the introduction of new – younger – spending groups, luxury brands have had to tailor their approach.

Changes are coming in terms of the countries being targeted (think: less expansion in China and more of a focus on South Korea, for instance, as many Chinese are now buying their luxury products there and by 2020, Chinese luxury consumers will spend $29 billion at South Korea luxury retailers). They are also altering the actual marketing practices being utilized. The latter appears to be taking the form of enlisting Asian ambassadors for an extra push in the modern and changing landscape. These ambassadors range from K-pop stars like G-Dragon and CL to YouTube mega-stars like Irene Kim.

Estée Lauder, Chanel & the K-Pop Star

Consider Estée Lauder. Several years ago, the American cosmetics company tapped Korean model, street style star, and television host, Irene Kim, to front its Estée Edit campaign alongside reality television star, Kendall Jenner. Together, Kim and Jenner worked on the Estée Edit, a new line of makeup by Estée Lauder that is geared toward young girls who are “rule breakers and risk takers.” According to a statement from the New York-based cosmetics brand late last year, Kim was brought on board as a global beauty contributor, a role in which she will create video content, cover trends, and possibly have input in product development. 

Aside from Estée Lauder’s major push to make its 70-year old brand enticing for millennials, its recent selection of brand ambassadors suggests that it is not just looking in its own backyard; the brand is looking to Asia – to South Korea, in particular, where Kim resides. And as Vogue quite aptly noted, “In the galaxy of Korean pop stars, street-style arbiters, and beauty tastemakers, model and television personality, Irene Kim [pictured below right] is a planet with some serious gravitational pull.” And it makes sense. Every year since 2006, sales of luxury goods in South Korea have risen at least 12% – reaching $10.6 billion in 2015, per McKinsey.

Estée Lauder is not the only brand attempting to bank on the promise of Korea and the surrounding regions, including the 3 million plus Japanese natives and 5 million plus Chinese natives that visited South Korea in 2014 and who have historically been an important driver of Seoul’s luxury goods market. Chanel has had its finger on the pulse there for some time.

Far from merely pioneering South Korean model, Soo Joo Park, who consistently appears in its shows and campaigns, Chanel has a history in Korea. Most recently, this took the form of the house staging its Resort 2016 show in Seoul, thereby drawing the likes of Korean pop stars G-Dragon and Taeyang; Korean actors Ah- Sung Ko, Jung Ryeo-Won, Park Shin-Hye and Siwon Choi; and Japanese actor Rinko Kikuchi. 

The show came over 20 year after the house first entered the South Korean market in 1992 by way of a fragrance and beauty counter at Shinsegae, a major department store franchise, followed by its first fashion boutique in 1997. The brand now has nine fashion boutiques in the country and, this year, plans to open its first flagship store open in Cheongdam-dong.

As for why the house, under the helm of Karl Lagerfeld, descended upon Seoul for its recent Cruise show,  Bruno Pavlovsky, Chanel’s president of fashion, said: “Firstly, as an inspiration. Today, South Korea is the most influential country in Asia, with its energy and creativity, its youth culture and the pop music and TV celebrities, who have become incredibly powerful, even in China and Japan. These are all great sources of inspiration for Karl Lagerfeld.” He continued on: “There’s also a business reason. South Korea is a fast-growing market, a very interesting one, now also open to the Chinese and Japanese who like to travel here for tourism. South Korea has become a top destination in Asia. And, finally, there is the venue!” 

Chanel is just one of the high fashion brands that have been quick to tap into the proven appeal of K-pop stars, such as G-Dragon and CL. G-Dragon of BigBang and CL of Korean pop group 2NE1 are penetrating the fashion industry by way of front row seats at the biggest runway shows in Paris, collaborations and ambassadorships with established brands, and editorials in the likes of Vogue.

G-Dragon has tens of millions of people following his every move on Instagram (and IRL). Not surprisingly, Chanel’s creative director, Karl Lagerfeld, swept up the massively influential mega-star years ago. Who could forget his 2013 “One of a Kind” music video, in which he wears head-to-toe Chanel while playing tennis with a Chanel-branded racket and balls? Or his appearance in Chanel’s Fall/Winter 2015 couture show, the “Chanel Casino,” alongside other celebrity participants like Kristen Stewart and Julianne Moore? Moreover, he has attended nearly every one of the brand’s couture shows, garnering major attention from his die-hard fans. He has brought the same following to his collabs with Giuseppe Zanotti, Chrome Hearts, and Ambush, amongst other brands.

Alexander Wang’s Spring/Summer 2016 ad campaign saw CL front and center. Wang also tapped G-Dragon for S/S 2016; his new song with M.I.A., Temple, served as the background track for Wang’s runway show. The rapper, singer, songwriter, and bona fide style icon, can be spotted sitting front row at shows like Chanel, Givenchy, Calvin Klein, and Moschino and stepping out in designs from cutting-edge labels like Vetements and Hood By Air. She can also be seen in regional Maybelline ads or with girl group, 2NE1, which has been touring the world. She boasts nearly 6.3 million followers on Instagram – where her photos garner significant levels of engagement.

Who is Romancing Who?

But the expansion plans are not just one-sided. While Western brands are looking to target Eastern consumers by relying on K-Pop and Korean media stars, these same stars (and their heavily-invested stake holders, including L Capital Asia, the private equity arm of French luxury goods giant LVMH, which invested $80 million in YG Entertainment, a leading K-pop management firm) are also looking to make their mark on a more global scale.  

Ways they are doing so? Well, world tours for one thing. Singing choruses in English, for another, which broadens the appeal of their songs. Teaming up with major international brands is, of course, another strategy to turn K-pop into a truly international phenomenon. And social media has quite obviously helped enormously by allowing these stars and their management teams to override geographic barriers.

It is not just the management companies pushing for world domination, though. “It turns out that the Korean government treats its K-pop industry the way that the American government treats its automobile and banking industry, meaning that these are industries that have to be protected,” says Euny Hong, the author of The Birth Of Korean Cool. NPR columnist Kat Chow echoes this sentiment, saying: “In the late ’90s, when Asia went through a huge financial crisis, South Korea’s leaders decided to use music to improve its image and build its cultural influence.

So, the country’s government poured millions of dollars into forming a Ministry of Culture with a specific department devoted to K-pop.” Such efforts included building massive, multi-million dollar concert auditoriums and developing an array of concert-related technologies. Hong elaborated saying: “They wanted Korea of the 21st century to be like America of the 20th century where America was just considered so universally cool that anything made in America would automatically be bought.” And it is working. No longer just a native phenomenon, Korea and its various stars are taking the world by storm. First there was Gangham style, the K-pop music video that garnered more than 10 million views on YouTube the day it was released; it ultimately received an additional 2 billion views. This was a pre-face for the Western world of influence of Korean stars. Now, roughly four years later, the commercial power of K-pop has not even been fully recognized.

It is on its way, though. A set of sold-out BigBang concerts in Newark, New Jersey last year is demonstrative of that. Describing the band as “an outlandishly popular K-pop boy band,” the New York Times’s Jon Caramanica, described the scene as “an extreme, intense, overwhelming Korean pop carnival,” complete with hoards of screaming fans.

The influence of K-pop and Korean media can also be seen by way of Western brands clamoring to team up with K-pop‘s biggest stars and/or to channel the appeal of Korean culture in a more general way. Nickelodeon, for instance, wants in on the appeal of K-pop. The American television network introduced a new show last year, called Make It Pop, a musical sitcom that features three boarding school teens who start a band called XOIQ. “Clearly, the marketing people at Nickelodeon said, ‘We need to tap into this audience'” says Hong.  

It makes sense. In addition to the burgeoning appeal of such stars on a more international basis, recent reports suggest that fans of the popular K-pop stars and other Korean media stars put their money where their mouths are. In addition to spending top dollar on concerts, K-pop fans – like other music fans – are buying into the individual K-pop stars’ various other ventures.

Not unlike Kanye West’s ability to sell a reported million dollars worth of The Life of Pablo merchandise, K-pop stars have massive selling power to go lean on with their side projects. In 2013, K-pop was profiting in the ballpark of over $200 million in exports – with roughly half coming from concerts. According to reports, such figures have grown significantly since then. K-pop and Korean media translates into a direct influence on consumer purchases. “For example, a YSL lipstick worn in the television series My Love from the Star sold out internationally” soon after it appeared on the program, says Michael DeSimone, CEO of e-commerce solutions company, Borderfree. “And many other luxury products prominently featured in the show also sold well.” The export of Korean cosmetics, for instance, have increased six-fold in the last decade.

In short: this is likely just the beginning – for both sides.  

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