With multiple top-tier brand businesses, lucrative new consumer groups and a rapidly-growing affluent spend rate, South Korea is poised to be the next luxury powerhouse in Asia, even overtaking Japan, according to a study by Luxe Brand Advisors. Since not many luxury brands understand the market – or, more specifically, the power that it has – not many of them have been using South Korea to their advantage, according to the report. However, bricks-and-mortar locations complemented by a strong ecommerce strategy can help marketers get hold of this market. “The changes in Korea's retail environment and advances in technology have led to the rise of home shopping and Internet commerce as viable channels for luxury brands,” said Sarah Chung, Seoul, South Korea-based partner and cofounder of Luxe Brand Advisors. “With its sleek production and ubiquity – home shopping channels have expanded into Internet commerce, mobile commerce and mail-order catalogs – home shopping networks offer luxury brands a way to reach a large audience. “Also, same-day delivery services and high-speed Internet make commerce a much more accessible and immediate channel than in the U.S.,” she said. Meet the market The South Korean luxury market is worth approximately $4.5 billion. It has grown at least 12 percent every year since 2006. Indeed, South Koreans’ desire for high-end goods shows no signs of slowing down with luxury sales, with leading department stores up almost 20 percent last year. In addition, the percentage of household income that luxury consumers spend on high-end goods is already higher in South Korea than in Japan at 5 percent and 4 percent, respectively. South Koreans are beginning to think more about differentiation than display. In fact, 39 percent of heavy buyers and 26 percent of respondents said that they increasingly prefer luxury brands or items that help them stand out from the crowd. Contemporary brands such as Miu Miu and Alexander McQueen that target younger consumers have made stronger entries in the market, per the report. This demographic – South Koreans in their 20s and 30s – have emerged as a strong new demographic for retailers because they have fewer financial responsibilities, increased openness to new ideas and an eagerness to define themselves through how they dress. Furthermore, women make approximately 90 percent of luxury purchases and make more money than their male counterparts, according to the study. This demographic of 30s and early 40s who make over $93,000 is called the Gold Miss. They have discretionary income to spend and the time to enjoy leisure activities such as golf, fine dining and travel. However, another huge consumer group is the Gold Mom. This demographic is the most lucrative segment in the consumer market. Since they are getting married later in life and having fewer children, Gold Moms have more money to spend and the desire to pamper the children they have. The monthly average number of purchases made by Gold Moms is higher than that of the average customer. In fact, they spend almost double that of an average customer. Getting started Some brands have already taken advantage of this lucrative market. For example, Louis Vuitton is the most-popular brand in the country, per the report. In September 2011, Louis Vuitton opened its first outlet at Seoul's Incheon International airport, which is expected to generate sales of $100 million its debuting year. Incheon surpassed Dubai and London Heathrow as the world’s biggest airport in terms of duty-free sales in 2011 and attracts an increasing number of Asian tourists, especially Chinese, who transit. Also, Donna Karan and Gucci opened flagship stores in the Seoul shopping district of Cheongdam Avenue. Christian Dior is expected to build its largest flagship store on the same street. The most surprising find in this research was how little brands understand the market and how they are managing their brands in South Korea, Ms. Chung said. Luxury marketers enter the South Korean market, but do not market themselves enough. As a result of lack of brand awareness, many are forced to close their doors. South Korea is considered an ideal retail market due to its predominantly urban, networked and highly-adaptive population. The country has the highest Internet usage in the world – there were 35 million online users in 2010, a high proportion compared to its overall population. Therefore, it has become an ideal market for brands that want to enter the market via ecommerce channels without high-capital investment, the report said. This represents almost 100 percent-penetration of consumers ages 10 to 40 years, according to the report. A good first step to get into South Korea is to do a market assessment to determine a target demographic in that market, how they can reach consumers and where they can sell to target them most effectively. “There is no cookie-cutter approach to succeeding in Korea, and what works in U.S. or Europe may not necessarily work in this market,” Ms. Chung said. Final Take Rachel Lamb, associate reporter on Luxury Daily, New York