Silvia Aloisi and Heekyong Yang

SEOUL (Reuters] – South Koreans drive a luxury goods boom. With COVID curbs reducing travel and duty free shopping, Chanel has been unable to keep bulk buyers from grabbing $10,000 bags for resale at markups up to 20%.

The storied French luxury and fashion company, François-Francoise Fashion, told Reuters that it has witnessed traffic to its South Korean boutiques since it started screening customers for those who might simply be buying to sell to other people in the resale marketplace.

After analysing their purchasing patterns, we were able identify them as bulk buyers. Chanel said that the boutique traffic had dropped 30% after this policy was introduced. Chanel didn’t say how these potential bulk buyers were determined, nor did it disclose country sales figures.

Chanel launched its strategy in July 2013 as the global market for luxury goods recovered from the effects of the coronavirus pandemic. According to Euromonitor South Korea ranks seventh in luxury goods markets worldwide. The research company estimates that it was only one of two top seven countries by revenue and saw sales increase last year from 2019.

Chanel’s supply is strictly controlled. This preserves exclusivity and boosts appeal. There are no other online options than cosmetics or perfumes. So much is the demand for Chanel in Seoul that there are long lines outside department shops before dawn.

A shopper said that he arrived at Chanel’s Seoul boutique at 5.30 a.m. to participate in an open-run. He spoke on condition that he keep his identity secret because privacy issues prevented him from revealing the exact item he was looking for.

Due to the high demand, Chanel’s medium-classic flap bag sold for 13.5M won ($11,031) — 20% more than its retail price. The sale was made on January 11th via KREAM (a KREAM affiliate that sells everything tech-related and luxury goods) – a website offering sneakers, shoes, and tech.

KREAM is an acronym that stands for ‘Kicks Rules Everything Around Me’. It was established in 2020. According to Reuters, it reported that December’s monthly transactions exceeded 100 Billion won. It also stated that South Korea’s resale marketplace was worth over 1 TILLION won – almost $820 Million – even if conservative estimates are correct.

‘QUEUE MANAGEMENT’

KREAM and other resale sites offer many brands. Chanel is, however, a highly sought-after brand due to its popularity among South Korean couples as one of their most beloved wedding gifts. Also, the frequent price rises of some of its iconic handbags.

    Chanel increased prices of some handbags, accessories and seasonal ready-to-wear earlier this month in Asia and Europe, including by 5% in South Korea – where prices have just been raised for the fifth time in nine months, according to Chanel Korea.

Chanel also announced it had implemented a “queue-management system”, in which clients are asked for their phone number and reasons for visiting to receive text messages about when they’ll be allowed to enter the boutique.

The impact of Chanel’s new purchasing pattern is a topic that has divided brand professionals and consumers.

“Consumers are voluntarily doing free ads for Chanel – camping outside (boutiques), doing open runs, posting their experiences on social media,” said Lee Eun Hee, a professor of consumer science at Inha University.

Chanel has attracted younger clients and earned a large chunk of revenue from it because of all the phenomena.”

‘LINE STANDERS’

Some consumers still feel that waiting in long lines or on wait lists has made it difficult to get work done.

A Seoul resident, in her 30s said that she had given up on Chanel products long ago. She declined to identify herself because of privacy concerns.

It’s difficult to get one. There are 300-300 people on the waiting list. By the time I’m ready, no product is left. It really bothers me and I don’t want to be in the middle of all this chaos.”

The bulk buyer-resellers are not going anywhere soon.

Some resellers spoke on condition of anonymity to discuss sensitive matters. They said they hire “linestanders” to help them stand in lines or enter stores.

One 30-year old reseller told Reuters that he had been reselling the purchases for more than 20%. This can prove to be more lucrative when inventories are lower.

The man said that he recently sold a Chanel Flap Card Holder on Karrot’s secondhand marketplace for close to 1 million won. That is almost 40% higher than the retail price, and it had been listed for just 5 minutes.

($1 = 1,223.8700 won)