High-spending shoppers have helped lift luxury sales in South Korea by around 12% each year since 2006 - but growing uncertainty in the market means they must adapt to changing trends, a new report says.

The percentage of household income that luxury consumers spend on luxury is already higher in South Korea (5%), than in Japan (4%), according to an annual survey by consultancy McKinsey & Company.

Last year sales of luxury goods in South Korea were worth an estimated $4.5bn, and in the first four months of 2011, sales at department stores were up more than 30% compared to 2010.

Still, researchers wonder whether it can last - especially since the performance of famous brands in Korea has been mixed. For example, LVMH and Ferragamo continued to do well, but others, like Gucci Group and Dior, saw sales drop in real terms in 2010.

In this year's 'Korea Luxury Consumer Survey,' McKinsey addresses these concerns, asking: Can South Korea keep it up? What's changing? And what do these trends mean for the players in the luxury industry?

The findings suggest that heavy purchasers are continuing to "trade-up" across all categories, while the rest are finding cheaper, non-luxury alternatives. But younger buyers and men offer opportunities for growth, and broader trends show private consumption rose by a healthy 4.1% in 2010 following a flat 2009.

But the Korean luxury market has also become a more challenging place to compete. First, consumers are seeking more distinctiveness and are more willing to try out new brands. Second, they are becoming more price-sensitive; they want to be convinced that they are getting value for their purchase.

Faced with mature markets and cautious consumers in Europe, the US and Japan, luxury firms targeting Korea should create excitement through innovation in the brand, products and promotions; clarify the brand message; and woo heavy purchasers.

Multiple tiers in products and pricing, as well as investing in multiple channels, are other strategies to help cope with the changing market, the research says.