Marketing your products and services
Market entry
The following three market entry options are recommended for Australian textiles and clothing companies:
1. Direct import – high market positioning
Designer brands and premium golf wear brands that are successful in the international markets, especially in the Japanese market, have a high market potential to be successful in the Korean market.
Department stores in Korea are highly positioned and any international fashion brands new to the Korean marketplace ensure that it is a priority to enter the department stores. As the Korean department stores do not purchase directly from the suppliers and they only get the sales commission, the sales agent of an imported apparel brand takes the responsibility of selling and taking care of customer services as well as promotion and public relations activities.
Any Australian supplier who targets the premium fashion market should have a capable exclusive sales agent who has an established network with department stores and extensive market knowledge. A long-term perspective and reliable partnership between the supplier and sales agents is one of the key factors for success.
As most department stores require international sales references or a proven record of good sales when first introduced to new overseas fashion brands, an Australian fashion brand that is unrecognised in Korea is recommended to open a flagship store at the high-end fashion districts such as ‘Chungdam-dong’ or ‘Apkujung-dong’ to assess consumer response and to attract the attention of department stores. Initial marketing activities such as product launches, press shows and PR activities are necessary to raise brand awareness. Sales agents invest these initial market entry costs and therefore they should have a long-term perspective and good sales networks.
2. License production in Korea
For inexpensive casual wear or sportswear lines, cost effective production is crucial to secure price competitiveness, and many international brands are therefore manufactured in Korea under license. Quiksilver is one example of the license brand that has been successfully marketed in Korea. However, when the brand owners want to keep a consistent international brand image in all export markets, they should give clear direction on brand positioning and should pay careful attention to the wording of the license agreement to avoid losing control over the brand.
3. Low priced high volume goods – direct import from third countries
The emergence of sports multi-brand shops could be a good market entry retail channel for Australian sportswear brands. Internationally well-known sportswear brands such as Nike, Reebok and Adidas are mainly manufactured in China and South East Asia, since country of origin in this segment does not undermine the image of these brands. For low priced high volume goods, production in a country with cheaper labour cost could be a good option to maintain competitive pricing structures.
Other recommendations
It is highly recommended that a joint venture between Australian fashion companies and European marketing companies could be a way of upgrading the status and level of awareness of the Australian fashion industry in Korea.
A combined effort between government and industry associations to increase the general awareness of Australian fashion is also highly recommended. The pro-active introduction of Australian fashion brands through hosting of international fashion shows and exhibitions and industry funding to attract international fashion buyers to Australia would also provide more awareness of and opportunities for Australian fashion companies in the Korean market.
For the export of finished woollen products, the establishment of a vendor supply system that supervises the retail price, combats illegal production copies, and controls distribution channels of the Australian product is also recommended as in many cases, unorganised export sales to multiple buyers has created confusion in retail prices and damaged the premium positioning of the Australian brand. To be established as premium brand apparel in Korea, suppliers should carefully manage their sales to Korea and consider the merits of having an exclusive sales agent.
Distribution channels
Korea’s apparel distribution channels include:
- Department stores
- Specialty fashion stores
- Discount stores
- Fashion outlets
- Traditional shopping districts
- Home shopping, such as Internet and catalogue sales
High-end fashion brands tend to be sold through department stores while medium and low priced products are sold through discount stores and traditional shopping districts.
Well-known imported labels are usually sold through the brand’s franchise stores but there are also many boutiques that specialise in selling imported clothing with or without a recognised brand. New-concept fashion malls (huge shopping centres that specialise in fashion items) are the latest distribution outlet to develop and have become a shopping attraction for tourists mainly from Japan and Taiwan.
Department stores
The preferred retail outlet for imported brand apparel is the department store, as the brand image can be positioned as premium and sales are very stable at department stores. However, it is very difficult for unrecognised imported apparel to enter department stores, and any local or imported brand can be expelled from a department store if sales figures are below expectation.
Unlike Australia, Korean department stores do not purchase products directly but rather lease floor-space to retailers and receive sales commissions from these tenants. The major stores include: Lotte, Shinsegae, Hyundai and Galleria.
As an alternative option, flagship stores can be established as an initial channel, to observe market responses from retailers and consumers. After six months or one year’s operation of a flagship store, successful new brands will often approach department stores to request space allocation, using data from their flagship store as evidence of the brand’s appeal.
Discount stores
Discount stores are the fastest growing retail sector in Korea. These discount stores sell budget-priced products, targeting middle and lower end of the consumer market. Included in this category are foreign retailers such as Walmart, Costco, Carrefour and Tesco.
Home-shopping
Korean consumers are increasingly purchasing consumer goods through mail order and through TV shopping and the Internet. Home-shopping is likely to prosper because retailers can save the high overheads associated with conventional retailing, while consumers can buy goods at competitive prices. Consumers also appreciate the greater convenience.
There are current five online shopping channels in Korea, see the 'Links and industry contacts' section below for a list.
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