In 2011 the professional skin care products market grew by 5.3%, driven by strong showings in China, growing by 9.3%, and South Korea, growing. Amore Pacific data concludes that the cosmetics market in South Korea is steadily climbing from 7.9 trillion in 2009, to 8.9 trillion in 2010 and 9.7 trillion in 2011. The boom in South Korea is largely attributed to a regulatory change that drove investment in beauty industries as well as greater consumer spending on domestic products. Furthermore, internet and home shopping channels grew by nearly 18% as domestic brands developed e-commerce channels contributing to larger online shopping channels.
All and all the digital sector plays a major role in South Korean beauty, with blogs and social media creating extremely savvy customers and e-commerce not only allowing for more purchases in-country but also from outside as well. If Chinese travelers are driving luxury sales in Europe, they are doing the same for beauty in South Korea. Cosmetic companies in the country have benefitted from the steady increase of Chinese and Japanese visitors and internet customers purchasing beauty products produced in South Korea.
The main reason for the boom, though, is the cultural significane of skincare and beauty in South Korea. Their shoppers are extremely beauty savvy, are knowledgeable about products and take their skincare seriously. They are unique in that 64% of the beauty and cosmetics market is comprised solely of skincare and makeup. South Korean women cherish flawless skin, leading to skincare occupying about 49% of their market. Between the facial skincare, makeup and night routine it is estimated that South Korean women use around 17 products daily.
Foreign beauty brands are recognizing the importance of South Korea, yet their sales are struggling. Beauty giant Estee Lauder is extending their portfolio to include a new DayWear creme in Asian retail stores, as well as adding a trio of Optimizer Intensive Boosting Lotions on-counter this month. L'Oreal also develops unique formulas and patents for its Korean market, citing the climate and lifestyle differences that must be taken into account for skincare. Regardless of tailoring their products, Estee Lauder reported an 11% decrease in sales from the first half of 2012 as compared to 2011, and Lancome posted a 17% fall in sales over the same period.
Decisions to purchase domestic products are supported by a variety of factors.
1) South Korean manufacturers have produced at a much higher quality over the last decade.
2) Aggressive marketing of "one brand shops"over the past few years, and their opening locations in major shopping districts, hypermarkets, malls and even residential areas.
3) Foreign cosmetic companies primarily sell at department stores, which customers have been avoiding during the recession.
4) Domestic products are significantly cheaper than foreign brands.
Foreign beauty brands should continue making products especially formulated for South Korean skin and environment, but they also need to look at their marketing and product placement. Using a KIO program to partner with bloggers to promote their products would be beneficial in gaining the trust integral to recruiting new customers would be key. Focused sampling plays, trial events and discounts could assuage the fear to spend during the recession.
Perhaps more importantly, recognizing the cultural differences in approach to skincare: South Korean women treat their skincare as a medical necessity, not superficial fun. Placing products in pharmacies and promoting a message of scientific benefit would be more in line with South Korean perceptions of beauty. Finally, creating one brand shops of their own, or partnering with domestic companies to get shelf space out of the department store could be a crucial win for foreign competitors.
Great stuff Megan.
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