The economic recession has changed people’s consumption patterns. Previously in Korea, consumers were often criticized for their excessive spending on items such as designer goods. These days, however, people no longer hesitate to purchase what they want to have. Many young people reduce their savings and increase their spending on their desired goods. They no longer purchase goods based on other people’s perception, but rather to fulfill their own satisfaction. Such type of purchase is known as “small indulgence.” According to the LG Economic Research Institute, people’s desire for luxury goods along with economic hardship generates a general consumption pattern of small indulgence. Long economic stagnation has reduced the general market size for luxury items but has increased the revenue of small luxury goods. In other words, people are willing to pay for expensive coffee, dessert, and many other types of affordable luxury goods rather than unaffordable designer bags or clothing. In this article, the Sungkyun Times (SKT) takes a closer look at the small indulgence syndrome.
Small indulgence is a consumption pattern shown during economic recession. It entails an increased consumption of commodities that are not only ostentatious but also affordable enough that they bring the most satisfaction to the consumer. Young people no longer save money to own a car or a house, but rather spend the money for small tokens of happiness. In other words, their consumption patterns changed from conspicuous to self-satisfactory. “The young generation is more self-expressive and is more inclined to decorate themselves. Because of economic reasons, they are now pursuing small indulgence”. - Professor Myung Jin Lee at Korea University
In early 2015, Korea was swept by many coffee shops that persistently maintained low-price policies. Juicy, for example, became very popular among university students who had little money to buy beverages but still had the desire for fresh drinks. Paik’s Coffee also became popular for its large quantity at low cost. Ediya Coffee is another brand well-known for its reasonable prices. These low-price stores have created an atmosphere that premium cafés cannot survive in the market.
|Desserts Displayed at a Café in Itaewon|
This notion, however, started to change. For instance, a dessert café in Itaewon is thriving even though it pursues a high-price policy. The customers of this café are willing to spend \7,000 for a small slice of cake. The café created a comfortable atmosphere and attracted those who want to chat with others. In fact, this microbusiness is more lucrative than franchise café brands, because people want to differentiate themselves through consuming somewhat expensive and scarce products.
Small indulgence can be seen among cosmetic users as well. Hermes is well known for expensive bags, but its cosmetic brand is earning popularity among young female customers. The average cost of a Hermes bag is around \10 million, but the brand’s perfume cost is about \300,000 which seems comparably reasonable. Those who buy the perfume feel satisfied to own a luxurious brand’s product at a relatively low price. L’OCCITANE’s beloved hand cream is another example. There are many alternative brands for hand cream, but customers still demand a luxurious brand because using such brand’s products guarantees the quality of the goods to some extent, not to mention the pure pleasure that comes after consuming a brand item. The popularity of Yves Saint Laurent lipstick can be explained in the same line. Due to the fact that there are too many substitutes, consumers want to use the best among all the options. The case of Hermes is somewhat different from that of L’OCCITANE and Yves Saint Laurent. While Hermes perfume may have gotten its demand due to the popularity of a different product in the same brand, cases of L’OCCITANE and Yves Saint Laurent are not quite linked to other products in the same brand. In the end, however, the cases of all these three brands can be regarded as instances of small indulgence.
Young people are starting to invest more in the interior designs of their houses. Even though many of them do not own a house yet, they are still eager to decorate their rented house bearing the cost. “Lemonterrace” is the largest online community where people gather to share information about interior designs. The visitors of the blog were originally comprised of females in the age between 30 and 40, but nowadays, young users are visiting the website to search for information they need for home designs. Additionally, a Facebook page called “Decorating House” is also popular among young Facebook users, and there are about 380,000 followers of this page. The page regularly posts great examples of designs and decorations that can be applied to small rooms. Broadcasting companies are also aware of young people’s interest in interior designs. JTBC has read the trend and launched a program in which experts from different fields redesign a random room based on their own tastes. The emergence of such TV programs reflects young people’s demand to personalize their space for their own satisfaction despite the expenditure.
Limitations of Small Indulgence
Small indulgence, however, has generated some issues. Many companies that benefit from the small indulgence syndrome do not have to lower their price due to consistent demand, and therefore, the general price level of certain goods remains high. For instance, Starbucks opened its _rst store in Korea during the late 1990s and has still maintained its high price so far. Korea’s Starbucks is one of the most expensive café brands in the world when compared to Starbucks located in other countries such as the United States and Japan.
Carbonated water is also considered a superior good in Korea. Europeans consider carbonated water a necessity because of the poor quality of tap water, which made it a substitute for mineral water. In Korea, however, carbonated water is regarded a premium water product, even though the general quality of tap water and mineral water in Korea is fairly good. For instance, Perrier, a French carbonated water brand, is three times more expensive in Korea than when sold in the United Kingdom. Despite this large price gap, the demand for carbonated water in Korea continues to rise. In 2011, the carbonated water market was scaled at \10 billion, but this number increased up to \80 billion in 2015. As the demand for certain items increased, the price of the goods rose as well. Therefore, it is clear that small indulgence creates the issue of overpricing.
Consumers want to purchase premium goods for every item that they use, but in reality, they cannot. Therefore, they can only afford to purchase certain lavish items, and this syndrome is referred to as small indulgence. Small indulgence, however, generates overpricing issues, so consumers must ponder on three points. First, they must reconsider whether the items that they are going to buy are worth the price. Second, it is essential to share information with other consumers so that there is no asymmetrical information issue. Lastly, they should rethink whether their consumption truly has a value to them because some consumers might simply follow other people.
Those who value savings might view small indulgence extravagant. Many young people, however, are starting to regard small indulgences as a way to pursue a happier life in difficult times. They value a happier life by spending instead of saving. Small indulgence is a way to reward themselves in difficult situations, and this phenomenon may continue until young people find other alternatives to fulfill themselves.
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