SKS Seoul, LG Electronics' ultra-premium built-in (built-in) appliance showroom, opened on the furniture street in Nonhyeon-dong, Gangnam District, Seoul, on the 15th. Stepping into the 1,918㎡ (about 580 pyeong) exhibition hall, rows of ultra-high-end kitchen appliances—ranging from refrigerator sets priced over 20 million won to wine cellars costing as much as 15 million won—were lined up as if integrated with the walls. All featured simple designs in stainless steel, with no sign of the large LCD screens or artificial intelligence (AI) functions that are popular in the home appliance industry lately. The familiar LG Electronics logo was nowhere to be seen.
◇ Building a "premium shield"… emphasizing brand value over short-term profit
SKS, stripped of the LG Electronics badge, is the new name for Signature Kitchen Suite, the built-in kitchen appliance brand that LG Electronics introduced in 2016. Kitchen appliances are often sold as sets, making their unit prices higher than other home appliances, and global demand for built-in appliances continues to grow. In response, global appliance makers are launching separate ultra-premium built-in brands to attack the market. Samsung Electronics also acquired the U.S. luxury built-in brand Dacor in 2016, while Whirlpool in the U.S. and GE are competing with JennAir and Monogram, respectively. To boost competitiveness in this market, LG Electronics revamped the SKS brand earlier this year.
LG Electronics is putting its weight behind the only SKS showroom in Korea, in the heart of Gangnam, as part of a strategy to strengthen the premium image of LG appliances through its top-tier brand. An LG Electronics official said, "Competition is intensifying in the mid- to low-priced appliance market as Chinese companies rapidly catch up," adding, "All the more at times like this, the top-tier brand must serve as a shield to protect the premium image of the overall brand and defend profitability." It is similar to the strategy of building a luxury image as an independent brand without the parent company name, like Hyundai Motor's Genesis and Toyota's Lexus.
This means the premium brand push is not aimed solely at profitability. LG Electronics' home appliance business maintains an operating margin of around 10% each quarter. Some expect profitability to improve further as the SKS business expands, but LG Electronics explained, "An ultra-high-end brand is not a business run for short-term profit, as it requires massive investment in customized design, construction support, and various marketing efforts for 'VVIP' customers."
◇ Expanding to Europe and South America… accelerating the ultra-premium strategy
If you outfit an entire kitchen with SKS appliances, prices start in the 50 million won range. SKS products released in Korea include six types—refrigerators/freezers, wine cellars, ovens, dishwashers, and induction cooktops—that can be combined in various sizes. The basic set of the signature column refrigerator runs in the mid-25 million won range, more than five times pricier than LG Electronics' high-end lineup, the Dios Objet built-in refrigerator. The 14.9 million won wine cellar divides the interior into three zones, each with a separate temperature setting.
SKS's main customers are high earners in their 40s and 50s. Interior design and construction firms are also core customers that LG Electronics is courting. Cho Chang-hyeon, Head of Team of LG Electronics' built-in showroom operations team, said, "Interior firms often recommend SKS to clients, so they play an important 'key man' role," adding, "Through builder special-sales teams, visits from B2B customers such as construction companies for luxury villas and apartments that factor in SKS products from the design stage are also increasing."
Most of SKS's sales currently come from Korea and North America. LG Electronics plans to expand into Europe and South America to target the premium built-in market. Europe is considered a market with high entry barriers, as ultra-high-end appliance brands such as Germany's Miele and Gaggenau have strong footholds. In response, LG Electronics is operating SKS showrooms at key hubs—including Seoul; Milan, Italy; New York, United States; and Napa Valley, California—to expand touchpoints with consumers.