"Japan Next, Then Korea?"... The Law of Luxury Price Increases [Luxury World]

Luxury Brands Focus on Price Increases in Early Year and May
Bags → Jewelry → Shoes, Multiple Rounds of Increases Become an 'Annual Event'
Luxury Purchases Rush When Price Hike News from Japan and Australia Emerges

"Luxury goods are cheapest right now."

This is a common saying regarding luxury products that increase in price every year. Because of this, it is considered more economical to purchase a product you like when you find it rather than saving several months' salary to buy luxury goods. This is due to the fact that most luxury goods increase in price over time.

Months When Luxury Price Increases Are Most Active: January and May

According to the distribution industry on the 16th, the timing of luxury price increases is fixed throughout the year. In particular, it is concentrated in the first half of the year around the wedding season starting from early in the year and May.

The period when price increases are most active is usually early in the year. When news of price hikes from high-end luxury brands like Rolex and Hermes spreads like an annual event, other luxury brands also follow suit with domino-like price increases. As the year changes, luxury brand headquarters in Italy, France, the UK, and the US adjust prices considering raw material costs and exchange rates by country. Price increases for the three major luxury brands known as 'EruSha (Hermes, Louis Vuitton, Chanel)' are mainly concentrated during this period. Luxury brands adjust prices from January up to as late as March.

The next period when price adjustments become active is around May. You can often hear news of price increases from luxury jewelry brands targeting the 'wedding season.' This is a time when demand for wedding bands (rings), watches, and necklaces increases, allowing luxury jewelry brands to capitalize on a special demand.

This year as well, Bulgari (7%), Piaget (5%), Cartier (5%), Van Cleef & Arpels (5%), and Rolex (5%) raised their prices around the wedding season. Rolex unusually raised prices again in June following January, which is believed to be due to skyrocketing gold prices.

Brands expected to raise prices include luxury watch brands Omega (3% estimated) and IWC (5%). Italian luxury brand Damiani, known for diamonds worn by overseas celebrities like Sharon Stone and Brad Pitt, is expected to continue double-digit price increases this year.

There is also a way to look for products with smaller or no price increases. Recently, luxury brands have been conducting multiple rounds of price increases by product category and item. For example, if shoes and jewelry prices were raised in January, a few months later prices for cosmetics, bags, and perfumes might be increased, or prices might be raised first for 'steady sellers' among bags and then for other product categories. Chanel raised prices for jewelry in January, beauty products in February, and bags in March this year. Products that have not had price increases may become major targets for future hikes.

An industry insider said, "As a marketing strategy of luxury brands, people rush to buy luxury goods at slightly lower prices before the price increase, which inevitably boosts sales," he said.

If Prices Rise in Japan, Do They Also Rise in Korea?

Another factor that can help predict the timing of luxury price increases is news of price hikes in other countries such as Japan and Australia.

Until recently, luxury communities have seen posts like 'I bought the Dior Lady Bag before the price increase.' The Lady Bag is a representative product of the French luxury brand Dior, with a domestic price of about 8.4 million KRW for the small size.

Previously, consumers hurried to purchase luxury bags approaching 10 million KRW because Dior raised prices in Japan. Last month, Dior Japan raised prices of key products such as the 'Lady Dior' by about 7%. The price of the Lady Dior increased from 860,000 yen (about 7.6 million KRW) to 920,000 yen (about 8.12 million KRW) for the small size. When prices rise in countries like Japan and Australia, domestic prices tend to rise after some time, which influences purchasing behavior.

Chanel, a representative brand for multiple rounds of price increases, has used this formula well, estimating the timing and rate of increases based on price hike news from overseas countries.

However, department store industry insiders agree that there is no fixed rule that prices in Korea rise just because they rise in Japan. In many cases, luxury price increases are suddenly notified from headquarters to local subsidiaries, so there is no consistent pattern.

Opinions also suggest that the recent price increases in Japan for Dior and Tiffany should be seen as efforts by headquarters to maintain prices considering exchange rates and raw material costs in those countries. A department store industry insider explained, "Japan is known as a place where Americans and Koreans like to shop because luxury goods are relatively cheap," adding, "Since there is a significant price gap with domestic luxury prices, the decision to raise prices was likely made." Furthermore, with the recent 'labor exploitation' issue involving Dior, consumer dissatisfaction is rising, so even if price increases are planned, it may be difficult to implement them.