South Korea’s youth culture – particularly music groups and fashion – is especially hot in China and Japan right now. Music groups like ‘Big Bang’ and Psy, whose “Gangnam Style” was the first YouTube video to reach a billion views, have drawn a worldwide audience and are helping fuel demand for Korean products.
Originally driven by the spread of Korean television dramas throughout East and Southeast Asia, South Korean pop culture is benefiting from a growing popularity that began in the late 1990s. One often overlooked of this ‘Korean Wave’ is the country’s strongly performing cosmetics.
Domestic cosmetics industry expanded from $8 billion in 2011 to an estimated $8.7 billion in 2012, according to
Amore Pacific, the industry’s largest player. The market also seems poised for continued export growth on the back of a 2011 free trade agreement (FTA) with Europe, the EU’s first trade deal with an Asian country. This is additional to the one in effect with the United States since March 2012.
South Korean cosmetics are especially popular in Asia. China accounts for over 40% of South Korea’s cosmetics exports while Japan is the second-largest importer. Beyond Asia, the diversity of ingredients and novelty of South Korean skincare products is attracting buyers the world over.
In February 2013, when North Korea tested its nuclear weapons, news outlets reported that South Korea was scrambling to get a jump on healthy skin. The keyword most searched on the Internet by South Koreans at the time was “Innisfree,” the name of a cosmetics company running a monthly sale. Innisfree, a subsidiary of Amore Pacific, specializes in natural ingredients such as green tea, clay from the island of Jeju, seaweed and other ingredients consistent with its “eco-friendly” philosophy. The response of South Koreans was attributed to a “what again?” resignation groomed over decades of hostile rhetoric from the North.
Innovative new products with ingredients such as fermented herbs Jeju Island volcanic clay, soybeans and even sheep placenta are constantly refreshing the shelf offerings and drawing international attention. Meanwhile, classics, such BB crème, continue to export well.
SURFING THE WORLD
One brand that represents the international success of South Korean cosmetics is
THEFACESHOP. Originally a single shop selling natural skincare in the Myeongdong district of Seoul in 2003, the company was bought by LG Household and Health Care in 2009. Since then, LG has grown THEFACESHOP into an international force with over 400 outlets in Japan, and addition locations in China, Australia, Jordan and the United States.
Other South Korea retailers with similar business models are also growing in foreign markets. While sales through traditional national channels, such as department stores and door-to-door sales, remain strong, exports and online shopping means South Korean cosmetics are now reaching a growing worldwide market.
Other developments may drive future growth. One trend is the increasing use of original design manufacturers (ODMs) to design and manufacture products for ‘brand name’ firms. This makes it easier for brand name to launch multiple products simultaneously and meet a growing demand for diversity in the market.
ODMs also make it easy for start-ups to by-pass some initial costs, such as investing in facilities and employees. Suppliers of materials are also seeing big changes inspired by ongoing research and development to improve the quality of cosmetics. For instance, research into particle solubilization and stabilization has helped improve cosmetic performance on the skin.