Wealthy consumers begin shunning luxury goods amid soaring pricesBusiness 2022-06-19 17:16
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| People wait in a line to purchase Chanel products prior to a price hike by the luxury brand, at a department store in Seoul, in May 2020. Korea Times file |
A 34-year-old restaurant owner surnamed Kim has been purchasing a luxury-brand product every month for the past three years thanks to his flourishing business. He didn't pay too much attention to the price tags before, forking over at least 20 million won ($15,444) each month on expensive clothes and other flashy items.
But his financial situation began to deteriorate after his restaurant started struggling with soaring raw material costs on top of higher labor expenses and rent.
"Everything has become so expensive in recent weeks, starting with food materials, gas and rent for my restaurant. The interest rates on my business loans have gone up and will continue to climb even higher," Kim said. "My personal investments have also been hit hard by the plunging stock market. I have to reduce unnecessary consumption starting with luxury goods for now," Kim said.
Even for the rich, now is not the right time for extravagance considering the fact that expenses are surging.
A 32-year-old surnamed Park cut back on luxury product purchases for a different reason. She feels luxury brands have raised the prices of their products too often in recent years, taking advantage of consumers reducing their spending on travel during the COVID-19 pandemic.
"I mean, luxury firms here have been giving all kinds of excuses to raise the prices of their handbags, jewelry and clothing, and it only looks like they want to rip off their customers. They have to know that people are not going to purchase luxury goods all the time," Park said.
Like Park, many wealthy consumers are starting to find it burdensome to purchase luxury goods these days.
According to a recent survey by global consulting firm Deloitte last month, 74 percent of wealthy respondents said they are worried about current living costs that continue to increase. In fact, 77 percent of middle-class respondents shared the same opinion.
Also, 54 percent of wealthy people predicted their financial status would not improve in the next three years, which is not much different than the 46 percent of ordinary people who gave the same answer. The two groups of consumers are starting feel the same due to the mounting economic difficulties.
"Rich people are often more sensitive about losing money. They only spend money when they have excess cash. But they know it is time to invest in gold or real estate at this moment instead of buying unnecessary luxury goods," a local fashion firm official said.
Kim Jae-heun[email protected]
