SEOUL, Aug 13 — When Charlotte and Dave Cho started online cosmetics retailer Soko Glam Inc in 2012, they hoped to help their fellow Korean Americans find their favourite products from the Asian nation in the US.
Their skin creams, cleansing foams and beauty waters attracted a broader audience. Turns out that about 70 per cent of Soko Glam’s customers are non-Asian.
“It goes to show that Korean skin care has gotten mass-market appeal,” said Dave Cho, whose company is based in New York. “A wide spectrum of people want results from their skin care and are hearing that South Korean skin care works.”
While South Korea may be best known to American consumers for Samsung smartphones and Hyundai automobiles, the country’s beauty products — led by brands from Amorepacific Corp and LG Household & Health Care Ltd — are making a splash in US beauty aisles.
South Korean women have extensive skin-care routines, using as many as 10 products a night to keep their faces looking young and healthy. That obsession with beauty has led to innovations like compacts that hold liquid foundation and creams that moisturise, beautify and protect skin simultaneously.
The new products are fuelling growth in the country’s roughly US$11.5 billion (RM46 billion) beauty and personal-care market, which Euromonitor International estimates will grow 13 per cent by 2019. The US market, currently at around US$76.7 billion, may expand just 4.8 per cent in that time, the research firm estimates.
Air-cushion compacts
US retailers have taken notice. Air-cushion compacts made by Amorepacific’s Laneige brand have won shelf space at Target Corp stores, while upscale cosmetics chain Sephora sells sheet masks and BB cream, both of which were popularised in South Korea.
All told, exports of cosmetics and beauty products from South Korea to the US have risen almost fivefold since 2005, reaching US$154.1 million last year, according to South Korean customs data provided by the US Commercial Service.
Sephora is carrying South Korean products “on an increasing basis,” said Priya Venkatesh, vice president of merchandising for skin and hair care in the retailer’s Americas unit. “They are ahead of many other countries in the development of new products and driving innovation and trends in the beauty market.”
The US growth and their booming domestic market, is fuelling gains for South Korean consumer-products makers. Amorepacific, the nation’s largest beauty and personal-care company, boosted sales 52 per cent from 2011 to 2014. LG Household & Health Care, the second-largest, increased revenue 35 per cent in that period.
US struggles
By contrast, Procter & Gamble Co saw its beauty and grooming division’s sales slide 11 per cent in its three most recent fiscal years. Last month, the company announced it was exiting the business by selling 43 beauty brands, including CoverGirl and Max Factor, to Coty Inc for US$12.5 billion.
Even Estee Lauder Co’s 25 per cent increase in revenue in its past three years trails the South Koreans’ growth. With that in mind, the New York-based company has been introducing products in Asia first to gauge market reaction in the region, which has the company’s “most discerning customers,” Chief Executive Officer Fabrizio Freda said on a conference call last year.
Even with their increasing popularity, South Korean beauty labels face obstacles expanding in the US. For one, the US customer base is more varied, with a range of different skin types and colours. There’s also the challenge of selling in a country that’s far larger and less densely populated than their home country.
Different strategy
“In Seoul, you can have one road shop, and all of Seoul can access that, but they need a different business strategy in the US since the consumer base is so diverse,” said Alicia Yoon, owner of Peach & Lily, which sells South Korean beauty products online and distributes them to retailers including Target and Urban Outfitters Inc.
There are signs that major South Korean conglomerates are interested in aggressive expansion in the US market. LG Household & Health Care last year considered a bid for US fragrance maker Elizabeth Arden Inc, which generated US$971.1 million in revenue in its most recent fiscal year. LG Household & Health Care ultimately decided not to seek an acquisition of the company.
“A lot of expansion by these companies has been quite small scale,” said Neil Saunders, managing director of Conlumino, a retail research and consulting company. “But if they decide to have a more defined strategy, Western companies will have to do a lot more to keep up.” — Bloomberg
