With an outline trade deal with South Korea now in place, the UK’s opportunity in the country looks set to flourish, but this dynamic market can be tricky to navigate.
Following in the footsteps of K-pop and K-beauty, K-fashion is no longer an insider secret, and South Korea has established itself globally as a cultural force to be reckoned with. The country’s trend-driven, fast-paced fashion scene is not one for the faint-hearted, but several UK brands are successfully carving out a lucrative business in this dynamic market.
The UK fashion industry’s links to South Korea have been growing stronger and stronger over the last couple of years. Korean-born designers such as Eudon Choi, Rejina Pyo, Gayeon Lee and JJS Lee regularly feature on the London Fashion Week schedule, while the debut of Korean eyewear brand Gentle Monster caused a stir last year when it brought a slice of Seoul’s futuristic retail prowess to London’s Argyll Street.
This relationship received a significant boost earlier this month, when the UK and South Korea agreed an outline deal that will allow businesses to keep trading freely after Brexit. The agreement is roughly in line with the terms of the existing Korea-EU free trade agreement, which was established in 2011. In 2018, around 99% of British exports to Korea were eligible to be exported tariff free.
Those seeking to capitalise on the trade deal and gain a slice of the Korean market must be cautious, however. It is vital to find the right local partner to help distribute and promote your brand. South Korea’s young, digitally savvy consumers demand a strong online presence, and can be fickle – a long-term strategy is key if brands want to avoid being a flash in the pan.
“The value of trade between the UK and Korea has more than doubled since the EU-Korea agreement was applied in 2011,” international trade secretary Liam Fox said when announcing the deal. “Providing continuity in our trading relationship will allow businesses in the UK and Korea to keep trading without any additional barriers, which will help us further increase trade in the years ahead.”
South Korea, with its population of 51 million people, has a fashion market that was worth £29bn last year. The British Chamber of Commerce in Korea (BCCK) expects it to grow 3% this year. Korean consumers are price-conscious but high-spending, and have a growing appetite for international fashion.
“South Koreans are highly fashion conscious and react quickly to emerging trends, which makes it an ideal market for a fast-moving, global contemporary brand such as ours,” says Peter Wood, CEO of premium men’s and womenswear chain AllSaints, which sells from 24 locations in the country in a mix of directly operated stores and concessions. The brand launched in South Korea, its first Asian market, in 2014.
South Korea is something of a trend-leader for the rest of the Asian region
Peter Wood, AllSaints
“Our strong British – and specifically London – roots resonate particularly well in South Korea, as they do in other parts of Asia. More practically, South Korea has very hot summers and very cold winters, which is a climate that tends to drive a higher level of spend on fashion. In addition, South Korea has a bigger menswear mix than is typically found in other Asian markets, which suits us well given our equally strong men’s and women’s collections.”
BCCK suggests that the South Korean menswear market is particularly strong at the moment because of male consumers in their thirties and forties who have strong purchasing power and are much more sensitive to changing fashion trends than ever before.
Wood adds: “South Korea is something of a trend-leader for the rest of the Asian region, which makes it a great platform from which brands such as ours can launch into other nearby geographies.”
Sean Blakeley, chief executive of BCCK, agrees: “Korea has emerged as a ‘test market’ for foreign fashion and accessories brands aiming to enter the wider Asian market, and for good reason. The popularity of Korean dramas, movies and K-pop culture has boosted the appeal of what’s popular in Korea into the wider Asian market.”
He says more and more international brands are eyeing Korean celebrities and enlisting them as brand ambassadors in the region to target consumers in Asia, particularly to attract Chinese consumers who are big followers of K-pop music and culture.
“Chinese tourists are the biggest foreign spenders in Korea, with an average tourist spend around £1,531 on shopping – six times that of a Japanese tourist,” he adds.
The right partner
Paul Alger, director of international business development at the UK Fashion and Textile Association (UKFT), says larger brands find Korea is a good stepping stone into China because of the close cultural links but also similarities of shape and size – Koreans tend to be of a similar body shape and size to the northern Han Chinese.
“One thing definitely worth mentioning is that although Korea is a great market, most of it is still in the hands of the big players,” adds Alger. “A lot of the buyers still operate on a consignment basis through importer wholesalers, who need reassurance that they can sell goods through, as they are the ones taking the risk.”
BCCK held a seminar at UKFT earlier this year to give UK brands an introduction to the Korean market, and provided an overview of the dominance of chaebols, a Korean term used to describe family-owned conglomerates.
“Major [conglomerates] such as Shinsegae International, Handsome (owned by the Hyundai Department Store Group), and Samsung Fashion (under Samsung C&T) import around 20 to 40 of some the biggest global fashion brands,” explained Blakeley. “They control most channels of distribution and offline points of sale including department stores and outlets. There are independent fashion houses that carry a fewer number of foreign brands, but major brands opt for the chaebols since the companies can invest more on their brands to develop them in the market.”
Reiss, for example, launched in South Korea last year with Shinsegae. It now has five concessions in Shinsegae stores (two women’s and three men’s), and one womenswear concession with its competitor, Lotte.
A spokeswoman for Reiss tells Drapers that the company believes it is working with the best partner for its business because Shinsegae has “a deep background in bringing international fashion brands to Korea and understanding the nuances of keeping a brands’ core DNA intact, while localising to the market”.
It is all about balancing short-term success with a long-term business model
David Keyte, Universal Works
Contemporary UK menswear brand Universal Works launched with a smaller local partner – NH International, which also works with Barbour – for spring 19, after selling directly to retailers in the country for a number of years. The brand is currently stocked in five independents in Seoul and three department stores, and is planning to open in more department stores over the coming seasons, alongside a standalone store and dedicated web platform.
“I find the fashion market in South Korea is so exciting but also so incredibly challenging at the same time,” says founder David Keyte. “You have to produce great product, take great photos and sell it in an interesting way. You need to act a lot quicker than in other markets and match their entrepreneurial desires, because otherwise they will grab you and let you go.”
This can lead to “boom and bust” in South Korea: brands can be in danger of overnight success with retailers ordering huge volumes for a few seasons and then nothing.
“It is all about balancing short-term success with a long-term business model,” he says. “Our partner is a great fit for us and they want to grow really quickly but we want to take it a bit more slowly to manage both our expectations.”
The data we receive from Instagram shows engagement outperforms any country in the world for the size of the market
Chris Gumbs, Drake’s
Keyte says the Korean consumer is digitally aware, and increasingly tied to mobiles and tablets. This means brands can access the market directly, but also that trends are set very quickly.
“It is a relatively young country, and the 20-to-30-year-old age group have more disposable income than their parents’ generation did,” he says. “They are also very digitally savvy.”
Chris Gumbs, sales director at premium menswear brand Drake’s, agrees: “A strong social media presence is so important in South Korea. The data we receive from Instagram, for example, shows that our engagement outperforms any country in the world for the size of the market.”
Drake’s had a small business in South Korea for the last decade but three years ago signed a deal with shoe retailer Unipair to become its agent and franchisee. South Korea is now the third-largest export market for Drake’s, and it is eyeing further growth outside of the current business, which is concentrated in Seoul.
Gumbs says he sees a lot of potential in the country, but adds that it can be a challenge given the dominance of the major conglomerates.
He feels for brands to succeed in the country, they have to have the right local partner and also invest time and effort to see results: “You need to take it seriously by engaging with the customer and promoting yourself. We hold events such as pop-up shops and trunk shows, which works really well.”
Gumbs believes menswear in particular is having a moment: “We are quite new to the market and it is a very young market with a menswear scene that is growing a lot. It feels like we’ve entered it seriously at the right time.”
Cashmere and woollen manufacturer Johnstons of Elgin launched its branded accessories collection in selected specialist stores owned by the Lotte store group last year, after selling apparel cloth and accessories as private label there for many years.
“We will be working with the Hyundai department store group to launch a Johnstons pop-up within the men’s department of one of their most prestigious stores in Gangnam-gu, Seoul in September,” says commercial director Alastair Macdonald. “This market should be good for us, as there is a good appreciation for European luxury brands. Our brand is already very strong within the Japanese market and both we, and our Korean partners, feel we can emulate that success in Korea.”
Now that the UK-Korea trade deal looks secure, it is clear that this dynamic, entrepreneurial market offers lots of potential for UK brands. However, they must be prepared to invest and engage with the consumer at a local level, particularly at a time when interest is high, to make the most of this significant opportunity.