“(Because of ‘strong dollar’) Americans these days don’t even buy luxury goods in their home countries. (Customs, etc.) If you think regarding this and that, isn’t Korea cheaper?”
An employee of a luxury jewelry store in Hawaii recently visited said: In the followingmath of the ‘King Dollar’, the number of cases of luxury goods making ‘U-turns’ to domestic stores is increasing. This is because, as the price competitiveness of dollar products decreases, the perception that “luxury goods are cheaper to buy in Korea” is increasing. Proof of this is that the waiting lines at Chanel stores in Korea are getting longer once more. Demand for purchases from high-end jewelery and watch brands such as Van Cleef & Arpels, Rolex, and Bvlgari is also growing.
As of the 14th, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1428.5 won. It increased 5.5% from an average of 1318.44 won in August to an average of 1391.59 won in last month. In the followingmath of the strong dollar that hit the world, the exchange rate broke the 1,400 won mark at the end of last month, which is considered a ‘psychological resistance level’. It has risen to a high of 1440 won this month.
At Chanel stores in Korea, an open run procession was born once more. In the morning on weekdays, you have to wait 4 to 5 hours before you can even step into the store. As more and more people are looking for luxury jewelry products, you may have to wait 6 to 7 hours to enter Van Cleef & Arpels stores, which cost tens of millions to hundreds of millions of dollars, even on weekdays.
Travelers who were planning a vacation last summer and trying to buy luxury goods at overseas stores with a lot of inventory experienced a high exchange rate shock. Kim, 36, who went on her honeymoon to Hawaii last month, gave up trying to buy her wife some of her luxury goods to commemorate her trip. Park said, “There were Bulgari earrings and Rimowa Carrier products that I had seen before, but when I looked at the exchange rate and tariffs, they were several hundred thousand won more expensive than in Korea.
Travelers who were thinking regarding purchasing duty-free products also fell into trouble. When the exchange rate rises, it is immediately reflected in the product price, leading to a contraction in consumer sentiment in duty-free shops that sell goods in dollar terms. Usually duty-free shops benefit from tax reductions, but the recent increase in the exchange rate has outweighed the reduction in tax. There is a price reversal in which some products are more expensive than department stores.
As the strong dollar phenomenon continues, a ‘reverse phenomenon’ is also occurring, in which resellers (resellers) seek overseas platforms. This is because it is determined that foreign exchange gains can make more profit than domestic transactions. The ‘Rolex Day Date 18238’, which is actually traded at regarding 20 million won in the domestic resell market, was recently traded at 24 million won ($17,500) on eBay. If you change the platform and sell it, you can leave a whopping 4 million won.
It is analyzed that the actual profit is large if you consider the exchange of won following receiving the sales proceeds in dollars. For this reason, e-commerce company eBay’s sales of used luxury watches in Korea’s cross-border transactions in the first half of this year increased by 12% compared to the same period last year.
However, there are many luxury companies that are planning to raise prices in Korea, so there is an analysis that U-turn demand due to a strong dollar will not continue. In the domestic market, ‘luxury inflation’ is expected to continue from the second half of this year to the first half of next year.
According to the Wall Street Journal (WSJ), the parity between the euro and the dollar (parity, 1 euro = 1 dollar) was broken due to concerns regarding an economic slowdown caused by a strong dollar and a surge in energy prices in the third quarter. As uncertainty in the European situation continues, the euro’s weakness will inevitably continue. This is the reason why there is a forecast that the domestic price increase of foreign luxury brands will increase. An official from the luxury industry explained, “There is a lot of pressure to raise prices due to the increase in transportation and logistics costs and the depreciation of the exchange rate.”
Ahn Hye-won, reporter at Hankyung.com [email protected]