The Mid-Price Is Gone1)
Chanel raised prices four times in 2022 and has done so twice already in 2023. Currently, Large Chanel Classic flap bags retail at 15.7 million won, up 98.2 percent in four years. Despite the high price increase, demand for luxury products remains high. Lee Eun-hui, a professor in the department of consumer science at Inha University, said, "As the recession continues, there is a polarized consumption trend that only extremely low-priced goods or high-priced goods sell well. The reason why luxury products sell well even during a recession is that when the price rises, they cannot be easily found, so their value maximizes, which is called the Veblen Effect." The Veblen effect stems from ostentatious consumption and its high price leads to the belief that it is of high quality. Goods experiencing the Veblen effect are usually those which often pop up on social media, and it is difficult to judge their exact quality and price. In that situation, people believe that price is an indicator of quality. Above all, the items should be rare. The higher the scarcity, the higher the value of these items. In the case of expensive goods with such scarcity and seen all over social media, the Veblen Effect appears.
In general, when the price of products increases, demand decreases. This is called the law of supply and demand. However, with the Korea Food Industry Association announcing "polarization" as a dining out trend in 2023, demand for low-priced products also raises, just as demand for expensive products increases. In this way, the phenomenon of purchasing premium goods as gifts to oneself arises, but also the act of purchasing inexpensive goods that emphasize functionality increases. Mailbox 25, a breakfast subscription service operated by GS25 for companies, provides meals that consist of the main food, drinks, and desserts to individuals at 40 percent cheaper than the regular price. Prices range from 3,000 won to 7,000 won, and sales in the first half of this year increased 532 percent compared to last year. With this consumption phenomenon, the demand for Private Brand products is increasing rapidly. The PB brand No Brand's 'A Bowl of Ramen' was about 400 won, selling 1 million units last year, recording a 37.8 percent rise. In addition, PB products of household goods such as wet wipes, tissues, and bottled water continue to increase. As such, the demand for expensive premium products is also increasing, but the act of purchasing goods emphasizing low price and functionality is also increasing.
1) Baek Seung-yun, "How far is the Veblen effect? Dior also raises prices up to 20%," Youth Daily, January 21, 2022