In freezing temperatures in Seoul’s Myeong-dong district, young women stand outside cosmetics stores trying to entice passersby to step inside. Wrapped up in thick, long overcoats, they hand out free samples while speaking a rapid barrage of Korean, Japanese and Chinese. Myeong-dong, a hip hangout for young Koreans and tourists because of its car-free streets and trendy cafes and boutiques, has a plethora of Korean cosmetics chains doing a brisk business even in the depths of winter.
Across from Myeongdong, in the department stores Lotte and Shinsegae, where women in high-heeled black and tan boots get in and out of expensive European automobiles, sales of more pricy cosmetics are also roaring. The Estée Lauder Cos. says sales of prestige beauty brands in South Korea increased 22 percent in 2009. That is more than double the growth of the mass market, which is dominated by the local companies Amore Pacific and LG Household & Health Care.
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It’s no wonder that business is booming. Looking good has always been of the utmost importance for Korean women, a by-product of the country’s cultural heritage that includes the ritual of the bath and an ideal of porcelain skin. Women’s beauty routines here are the most intensive in the world. Korean consumers use on average six applications of skin care products in the morning and five-and-a-half at night, according to Klaus Fassbender, president of L’Oréal Korea. “Koreans believe healthy skin is a reflection of the personality,” he says.
South Korea is the world’s 12th largest cosmetics market. Last year, sales were about $6.6 billion, according to the country’s biggest cosmetics company, Amore Pacific. Amore Pacific claims a 34 percent market share, while imported brands had a 36 percent market share in July, according to the Korean Cosmetics Association. Currently, Estée Lauder, L’Oréal, Chanel and Dior have individual market shares of less than 5 percent, ccording to Amore Pacific, but their brands are the most highly sought after in department stores. This year, sales are expected to rise 10 percent, to about $7.3 billion, according to Amore Pacific estimates.
“We like to say that in Korea, the husband will go without his meal so that his wife can buy her cosmetics or lipsticks,” says Christopher Wood, general manager of the Estée Lauder Cos., Korea. “Women usually control the household finances in Korea and as such have control over disposable income.” Korea is one of Lauder’s top five markets and among its fastest growing.
Beauty companies are bullish on Korea. The local consumers are eager to adopt new trends, while the economy, which escaped the ravages of the global recession last year, is expected to grow 5 percent this year.
About 30 percent of beauty products are sold in department stores, about 10 percent are sold via door-to-door and 60 percent are sold through beauty stores, supermarkets, mom-and-pop stores, the Internet and TV home shopping channels. In the Fifties, Sixties and Seventies, most women bought their cosmetics from saleswomen who called at their apartments and also dispensed makeup and beauty tips. Older women still prefer personal sales calls, but younger women now like to visit the numerous stores that have popped up, including specialty chains and department store counters.
The popularity of cosmetics chains in Korea is the result of the 2003-to-2005 credit card crisis, which created a demand for low-priced products available in convenient locations. Missha was one of the first such chains to have a coherent marketing strategy; a bright, welcoming interior, and a trained staff to advise customers.
In the ultracompetitive Korean market, though, Missha’s competitors were not far behind. Aritaum, Skin Food, Innisfree and Etude House mimicked the company’s approach, and have since begun to distinguish themselves by appealing to different consumers. Etude House, for example, is marketed to teenagers, while Skin Food and Innisfree are geared to those who want to buy environmentally friendly and natural items.
In terms of products, those related to Chinese and Korean traditional medicine, blemish balm cream and antiaging skin care were the main drivers of sales last year. Chanel reports that sales of its antiaging Sublimage line have grown about 25 percent per annum since its launch in 2006. Korea’s bests-elling prestige brand, Amore Pacific’s Sulwhasoo, which is aimed at women in their 40s, boosted its sales 29 percent in the third quarter of 2009 versus 2008.
Blemish balm cream—called BB cream—is especially popular here, as the trend for women is to look as natural as possible.
The “bare face” boom has influenced Japanese women who come to Korea for short holidays to buy Korean cosmetics and get a taste of Korean culture. Young Japanese women are avid fans of Korean soap operas, pop music and Korean fashion and beauty products. Blemish balm cream is now a top seller in duty free shops.
About 70 percent of the customers shopping in Etude House’s Myeong-dong store are Japanese, says manager Kim Mijin. Etude’s bright pink interior may aim to entice teenagers and twentysomethings, but it is the older women who spend money. “We have a princess concept, but it is women in their 30s, 40s and 50s who have money, and these women, particularly Japanese women, buy our products,” says Kim.
Choi Sook-kyoung, who manages a boutique called Global Cosmetic in Myeong-dong, says 90 percent of her customers are Japanese women, and the most popular products are BB cream, moisturizers, whitening products and antiaging skin care.
There is also the choc choc effect. Korean women like to feel that their skin is moisturized, or choc choc. Beiersdorf, for example, hired the popular Korean pop group the Brown Eyed Girls to sing its “Choc Choc” song to help spark sales of Nivea lip care products. Women here particularly like moisturizers that stay longer on the skin. Younger consumers prefer products to have a water feel, while those on the older side prefer an oily feel.
Sun protection is also very important. L’Oréal says studies have shown the sun’s ultraviolet rays are two times stronger in Korea than in Europe. As in the rest of Asia, tanned skin is frowned upon, and the demand for brown spot correctors is high.
Makeup sales are strong, too. Many link it to the country’s four distinctive seasons. MAC has become the brand of choice for wealthy women, while working women tend toward Bobbi Brown.
Still, non-Korean brands have struggled to establish a strong presence. Securing adequate distribution around the country, particularly outside of the major urban areas, has proven difficult, so most brands are reliant on department and duty free stores, exposing them to the vagaries of the local market. Last year, for example, Chanel went head-to-head with Lotte, Korea’s biggest department store, when the retailer wanted to change the size and location of some of its counters. Chanel refused and pulled seven of its counters from Lotte.
“The two companies had different business strategies and goals,” says Chanel spokeswoman Kim Young-eun. “Lotte has been and is still a very important business partner in Korea to Chanel.”
Japanese brands have also found it rough going in Korea. “Shiseido in Korea is not yet positioned well as a prestige brand,” says Shiseido spokeswoman Min Seon-young.
But there is hope for non-Korean cosmetics brands. The Internet and TV home shopping channels may help boost their sales. Competition with Korean manufacturers may become less fierce. Korean middle-size cosmetics manufacturers such as Coreana, Charm Zone and Hankook are now struggling, no longer able to rely on middlemen to get them into mom-and-pop cosmetics stores.
On the marketing side, celebrity sells, with local pop singers and actresses tapped by many brands to endorse products. Kim Yu-na, a favorite for the 2010 Olympic ice-skating gold medal, appears in ads for LG’s Lacvert Ice Kiss lipstick, while the TV personality Lee Hyo-ri endorses LG’s Isa Knox’s whitening products. Amore Pacific uses actress Kim Tae-hee for its Hera lipstick brand and another popular actress, Lee Na-young, for Iope cosmetics, while L’Oréal has hired actress Ko Hyunjung as the face of Lancôme.
Plastic surgery is also widely popular. One of the country’s most famous actors, Jang Dong-gun, reported that his “ideal” women would be dark skinned, have long hair, slightly creased eyelids, a small but sharp nose and a V-shaped face. Many women have surgery to correspond to that “ideal.” Before they start university, teenage girls go to Seoul’s Gangnam district, where many surgeons practice. Sunglasses and face masks protecting recently altered faces are widespread on the subway platform at Apgujeong Station in the summer.
The men’s market is also booming. Last year, two popular soap operas, Boys Over Flowers and Queen of Housewives, both of which featured young male actors, quickly won widespread appeal among women and motivated many men to improve their grooming. The result: “Pretty boys” are popular now instead of “macho men.” The online retailer D&shop says men’s skin care sales leapt 187 percent last year versus 2008.
Korean brands are expanding abroad, as well. Skin Food has 169 stores outside Korea, from the Middle East to Japan. Amore Pacific had 273 Laneige stores across Asia and 37 Amore Pacific stores in the U.S. and Japan. The company also plans to launch Sulwhasoo in China and the U.S. this year as part of its goal to be a top 10 global cosmetics company by 2015. The brand was number 20 in WWD Beauty Biz’s 2009 global ranking of the biggest beauty companies.
“The Korean wave, or Hallyu, of pop music, cinema and food is spreading over Asia,” says L’Oréal’s Fassbender. “Korea is a role model for beauty.”
Capital: Seoul
Largest City: Seoul
Official Language: Korean
Area: 38,502 square miles (total); water (%) 2.9
Currency: South Korean Won (KRW)
Population: 48,508,972
Internet TLD: .kr
Calling Code: +82