Gentle Monster exceeds KRW 600 billion in annual sales… New Korean luxury products selling well overseas

Sales of iICombined, which operates the luxury sunglasses brand Gentle Monster, exceeded 600 billion won for the first time last year. Popularity overseas such as China and Japan served as a stepping stone.

According to the Financial Supervisory Service on the 24th, IAI Combined’s consolidated sales last year were KRW 608.27053 billion and operating profit was KRW 151.11463 billion. It increased by 48% compared to the previous year (KRW 410 billion).

On a separate basis, iICombined’s sales increased from 150 billion won in 2016 to 300 billion won in 2022. During this period, an operating profit of 90.6 billion won was recorded, and the profit margin reached the 20-30% range.

The reason why iAI Combined sales are showing explosive growth is because Gentle Monster is very popular overseas. Last year, IAI Combined’s overseas sales amounted to 227.86 billion won, exceeding one-third of the total. In particular, sales from Chinese and Japanese corporations were high.

Gentle Monster, which started as a startup founded by CEO Kim Hankook in 2011, has emerged as Korea’s ‘new luxury product’, surpassing foreign luxury sunglasses in about 10 years. E-Best Investment & Securities published a report on IAI Combined in March last year and evaluated it as “the next generation Korean luxury stock.”

‘Space marketing’ based on unconventional and sensuous store design is the secret to Gentle Monster’s popularity. From the beginning of his business, CEO Kim focused on building a brand image by opening stores rather than on supply. The first offline store opened in 2014, and it gained great popularity not only among Korean but also Chinese consumers when Jeon Ji-hyun, the main character of the SBS drama ‘My Love from the Star’, wore Gentle Monster sunglasses.

Gentle Monster currently has offline stores in many countries around the world, including Korea, China, Taiwan, Singapore, Japan, the United States, the United Arab Emirates, the United Kingdom, and Australia, and these stores are decorated with huge art objects with different themes. The commercial space was created closer to an art space.

In China alone, it has 20 stores in 15 cities. AICombined, which has been recognized for its store design capabilities, was also the first Korean company to design the space for the Beijing branch of SKP-S, a global department store in China, in 2021.

In the first half of this year, a standalone store was opened in Tokyo, Japan. Last year, we also established new subsidiaries in Japan, the Philippines, and Taiwan. This is to begin full-scale overseas expansion.

In addition, the company has recently been working hard on promotion by continuing to collaborate with celebrities such as soccer player Son Heung-min and singer Jenny. In addition, we are continuously introducing products in collaboration with overseas luxury brands such as Fendi, Moncler, and Maison Margiela.

However, there are some concerns about such aggressive marketing and overseas expansion. iICombined’s Chinese and Beijing corporations had losses of 4.8413 billion won and 1.79165 billion won, respectively, last year. The U.S. corporation also has a deficit of 1.547 billion won. Some point out that sales and administrative expenses (approximately 355.3 billion won), which account for more than half of operating profit, should be gradually reduced for practical purposes.

Gentle Monster previously attracted 60 billion won in investment from Louis Vuitton Moët Hennessy (LVMH) in 2017. At this time, the company expanded its business by launching Tambourines, a cosmetics company, and Nudake, a food and beverage (F&B) store.

This stake was purchased by Luxottica, a global eyewear manufacturer and distributor, last year, making it the second-largest shareholder, securing approximately 13% of the shares of IiCombined. Once collaboration with Luxottica begins in earnest, it is expected that the company will expand into Europe and North America in the future.

IiCombined, which was estimated to be worth 700 to 800 billion won in 2017, rose to the ranks of unicorns in 2020, its 10th anniversary. At the time, the corporate value measured by IMM Investment in the process of acquiring the existing shares of IAICombined was approximately 1.2 trillion won.

Kim Nan-do, a professor of consumer studies at Seoul National University, explained in his book ‘Trend Korea 2023’ that the secret to Gentle Monster’s popularity is the power of space. Professor Kim evaluated, “(Gentle Monster) increased the capital of the brand by activating the virus so that emotionally stimulated consumers in an innovative space voluntarily spread their experiences.”