K-Pop Merchandise Market Surpasses $1 Billion: A Major Revenue Stream for Entertainment Companies

The K-pop merchandise market has exceeded 1 trillion won, establishing itself as a major revenue source for domestic entertainment companies. As merchandise prices rise and product variety expands, K-pop fans' spending naturally increases. However, there are concerns about the burden of merchandise prices reaching hundreds of dollars.

According to Kiwoom Securities on the 29th, last year, the merchandise (MD) sales of the four major domestic entertainment companies amounted to approximately 1.1 trillion won, an increase of over 40% compared to the previous year. Kiwoom Securities forecasts that the market will grow to 1.6 trillion won this year. This marks a remarkable growth of over 40% for two consecutive years. The ongoing world tours, pop-up stores, and regular merchandise sales have contributed to this outcome. It has reached a point where people say, 'Concerts are events, but the real money is made from merchandise.'

Entertainment companies are aggressively expanding their merchandise lineup. In the past, the MD market was centered around light sticks. Light sticks were a reliable product with a long lifespan and could be sold globally, securing a stable high margin of over 30%. However, recently, categories such as clothing, photocards, accessories, and living goods have rapidly expanded. These items are relatively difficult to manage in terms of inventory. This is why entertainment companies are raising prices and using strategies like limited edition releases to encourage purchases.

For example, clothing sold at SM Entertainment's flagship store 'Kwangya@Seoul' in Seongsu-dong, Seoul, such as thin jackets or hoodies, easily exceed 100,000 won. The prices of related products have steadily increased over the years. Keyrings have become a popular item. The variety of products ranges from small accessories to household items. Strategies like limited sales, random assortments, and pop-ups that create a 'buy now or miss out' FOMO (Fear of Missing Out) effect are also employed.

The desire to collect is also stimulated. Merchandise combined with random photocards or event entry tickets is an example. According to the Korea Consumer Agency's 'Fandom Marketing Consumer Issue Survey,' fans purchase an average of 4.1 albums to obtain their desired configuration, and in cases where event entry tickets are involved, the number can increase to as many as 90. This is interpreted as targeting the unique consumption tendency of fandoms, where satisfaction does not easily decrease even with increased consumption.

The resale market and social media certification culture also accelerate this trend. The 'Wish Doll' keyring from NCT WISH, originally priced at 18,000 won, soared to as much as 80,000 won in the resale market. In this vicious cycle where the increased price standard is reflected back in official sales prices, the average annual expenditure per K-pop fan is estimated to be around 1.04 million won.

Entertainment companies have now completed a structure that generates stable cash flow through MD beyond albums and performances. Advanced marketing techniques and sophisticated profit designs are credited with elevating K-pop to a 1 trillion won MD market.

Yoon Yejin, Ten Asia Reporter cristyyoun@tenasia.co.kr