In the first half of next year, a six-story, 3,200-square-meter (969-pyeong) building on the luxury street of Cheongdam-dong in Gangnam District, Seoul, will be entirely converted into a store for the Italian luxury brand Bottega Veneta. The brand has 28 stores in domestic department stores but has never opened a standalone store outside them. A few steps away, Tiffany is preparing a seven-story standalone store (3,656 square meters/1,107 pyeong), and Rolex is preparing a standalone store measuring 911 square meters (276 pyeong).
Global luxury brands are rushing to build extra-large stores in Seoul. Inside department stores, they are also competing to expand into multi-floor spaces. With solid domestic demand, a record number of foreign tourists, and the influence of K-culture, some say Seoul is emerging as Asia's "luxury showcase," replacing Tokyo.
According to the industry on the 10th, Bottega Veneta has ramped up preparations to open a standalone store, including launching a recruitment in June for a director to oversee the Seoul flagship store. Considering the Tokyo flagship and others, it is likely to go beyond a simple retail space and become a venue that encapsulates the brand's full product lineup and craftsmanship. The exterior and interior are expected to reflect Seoul's local characteristics.
◇ Bigger on the street and in department stores
The upsizing of luxury stores is not limited to the Cheongdam-dong luxury street district. Global luxury brands are expanding their footprint inside major department stores as well, creating multi-floor and mixed spaces to boost their presence. This also aligns with department stores' strategies to attract luxury brands that drive strong sales contributions and foot traffic.
Louis Vuitton in December unveiled the world's largest store at Shinsegae Department Store's main branch "The Reserve," bringing together fashion, watches and jewelry, beauty, a restaurant, and a cafe. Bernard Arnault, chairman of LVMH, visited the store as his first stop during his trip to Korea in May.
In early this month, the French luxury brand Dior reopened its store at the Shinsegae main branch after a renovation. The previous store was expanded and relocated into a two-story space, making it the largest Dior store among domestic department stores. Lotte Department Store's Busan main branch will sequentially expand and renovate its Piaget, Montblanc, and Rolex stores. Hermès and Goyard also transferred their Galleria Luxury Hall stores last year to larger spaces than before.
As global luxury brands' view of Korea shifts, analysts say Asia's showcase market is expanding from Japan to Korea. Until now, major luxury brands centered large flagships in Japan, such as in Tokyo's Ginza and Omotesando, and presented spaces where consumers could experience the brand, including cafes, restaurants, and exhibition areas.
◇ A surge of foreign tourists and K-pop fandom
With the number of foreign visitors to Korea reaching an all-time high recently and the won remaining weak, Korea is emerging as a key hub for global luxury consumption. Thanks to exchange-rate effects, the price appeal of domestic products has grown, and foreigners' luxury spending is rising quickly. In the first half of this year, foreign-customer sales at Lotte, Shinsegae, and Hyundai Department Store totaled about 1.7 trillion won, a record high. Lotte Department Store's foreign sales of overseas luxury brands rose 130% from a year earlier.
A weak won is also favorable for luxury brands increasing their investments in Korea. From the perspective of overseas headquarters, the relative investment expense is lower, strengthening the incentive to expand large stores and flagships. An industry official said, "Because we can scale up investments with the same budget, there is a view that now is a good time to invest in Korea."
The growing influence of K-culture is another reason luxury brands are focusing on Seoul. As K-pop idols such as BTS and Blackpink serve as global luxury brand ambassadors, overseas fans' interest in the brands and their products is increasing. That interest is translating into actual store visits and purchases by fans visiting Korea, enhancing the marketing value of Seoul stores.
Stable domestic demand for luxury also supports brands' investment expansion. In the first half of this year, luxury sales at Lotte, Shinsegae, and Hyundai Department Store rose 35%, 35.6%, and 35.2% year over year, respectively. Luxury accounts for more than 40% of total department store sales at all three companies.
Global luxury headquarters are also paying attention to the growth of the Korean market. Moncler said in its first-half results that about 10% of the group's total business revenue comes from Korea. Bottega Veneta and Hermès are also said to have noted strong sales in Korea. According to global market research firm Euromonitor, the size of Korea's luxury market expanded from 13.3283 trillion won in 2016 to 21.1071 trillion won last year, an increase of about 8 trillion won over 10 years.