S.Korean fashion brands rush to China for pent-up demand

South Korean fashion brands are poised to expand their stores in China, aiming to capture pent-up demand in the world’s top consumer market after its reopening.

South Korean retail giant E-Land Group’s low-priced casual brand WHO.A.U store at Parkson Newcore Mall in Shanghai has been packed with customers of late, indicating that “revenge shopping” -- a post-lockdown shopping zeal to purchase luxury goods and fashion items -- led to higher sales after China lifted its zero-COVID policy last December, according to the group’s holding company E-Land World Ltd.

“China is experiencing the revenge shopping we enjoyed in South Korea last year,” said an E-Land official on Tuesday.

Global luxury conglomerates are also relishing a sharp rebound in the Chinese economy and increasing investments there to ramp up sales.

Kering, a French-based multinational corporation specializing in luxury goods with brands such as Gucci and Balenciaga, cheered the return of customers on the mainland, according to foreign media reports.

"The malls are full, streets are full and people have completely returned to normal life," said Kering Chief Executive François-Henri Pinault said last month when the group released its 2022 earnings.

"I was very surprised by the level of support expressed by the authorities to (support) domestic consumption, the private sector and international companies. The business environment … is much more welcome now," he said.

EXPANDING NUMBER OF STORES

South Korean fashion retailers are raising investment on expectations that the ongoing consumption recovery in China, the world's second-largest economy, is likely to accelerate from the second quarter when the sales of summer fashion items often increase.

Outdoor clothing retailer F&F Co. plans to raise the number of US Major League Baseball (MLB) apparel stores to 1,000 from the current 800 by the end of this year. E-Land has a similar strategy.

“We had no choice but to rely on Chinese packmen last year as the movements of products and people were not allowed,” said another E-Land official. “But we see chances of growth this year and plan to raise investments.”

The company is scheduled to complete its second logistics center of 350,000 square meters in Shanghai this year and expand online sales channels for WHO.A.U on the mainland.

APR Corp., the seller of the street fashion brand Nerdy, plans to double the number of stores in China to 100 from the current 50 this year. Nerdy generated 11% of its total sales of 91 billion won ($70 million) last year from the country.

INTENSIFYING COMPETITION WITH CHINESE BRANDS

South Korean retailers relying on China are facing heated competition with local companies, however.

In the 2010s, those South Korean retailers competed against foreign makers by providing similar quality with luxury brands at cheaper prices. But they have to fight against Chinese competitors now, which improved their product quality.

Sales of cosmetics makers such as Amorepacific Corp. and LG H&H Co. in China are struggling, for example.

In turn, South Korean retailers are refraining from investments on the mainland and are focusing on other markets such as the US.

Shinsegae International Inc., which sells the cosmetics brand Vidivici in China, was reluctant to raise investment there despite the pent-up demand as its sales have tumbled in the country. Instead, the fashion and beauty unit of South Korean department store operator Shinsegae Inc. is set to open stores for the luxury cosmetics brand Poiret in the US and France this year.

LG H&H is accelerating its expansion in North America with a mini tattoo printer, while Amorepacific last year acquired the US clean beauty brand Tata Harper.

Write to Jeong-Cheol Bae at bjc@hankyung.com
 
Jongwoo Cheon edited this article.