Clothing retailers, car companies setting up direct operations
Foreign producers of consumer goods are increasingly launching direct operations in South Korea, with the domestic market for quality consumer products growing. In the late 1990s, luxury brands such as Louis Vuitton, Gucci, and Cartier had already set up their branch offices here, and the trend is continuing in the clothing industry. American jeans brand Guess recently announced it will establish a subsidiary, Guess Korea, here next year. So far, Guess has sold its products in South Korea by leasing its brand to a local company. The announcement by Guess came after its rivals, Levi Strauss & Co. and Calvin Klein, overtook Guess in sales by setting up a branch office in Korea. Both ’Levi’s’ and Calvin Klein passed the 100 billion won (100 million USD) mark in terms of sales in South Korea last year, compared with some 40 billion won sold by Guess. Lee Jae-chung, country manager of Guess Korea, said, “Sales will significantly rise if Guess sells its products via a direct subsidiary.”Since early this year, Japanese digital camera maker Canon has begun selling its products directly after severing ties with LG Corp. Last year, Italian fashion brand Gianfranco Ferre launched its subsidiary in South Korea. Other foreign brands such as Burberry and Timberland have been aggressively marketing themselves after launching their local units between 2002 and 2003. The trend is not confined to the fashion industry. In the case of imported cars, Volkswagen Korea and Nissan Korea were set up last year. Out of some 20 imported auto brands, only Peugeot and Porsche lack subsidiaries here. Such moves are mainly driven by South Korea’s growing demand for quality consumer goods and products with reputation. “Foreign brands have been highly interested in South Korea because their market potential is greater here than in Hong Kong and Taiwan,” a fashion industry official said. Also, when competition gets fierce, foreign brands that sell their goods under licensing agreements with local partners may lose their market shares and sales to South Korean brands due to lack of marketing. More and more companies seek to trust sales to their own subsidiaries. Domestic brands are falling behind as they fail to meet changes in consumer tastes, as people are easily introduced to international fashion trends via the Internet. Experts say local brands have the difficulty of catching up to global brands due to smaller market size and lower level of investment. South Korean consumers’ preference for luxury goods is also helping foreign brands make their mark here.
