Health & Beauty

After withdrawing from the Chinese market one after another, the life of cheap Korean beauty in the local market is not easy.

According to data recently released by the Korea Fair Trade Commission, the closure rate of cosmetics stores in Korea last year reached 28.8%, ranking first in the retail industry. Among them, Mishang, Nature Park, Magic Forest and other brand franchise stores have been reduced by more than 100. Magic Forest's operating loss in the second quarter of this year reached 3.1 billion won (approximately 17 million yuan).

Market analysis claims that the decline of Korean beauty stores is the result of multiple factors.

South Korea’s "Dong-A Ilbo" once analyzed that the sharp decline in Chinese tourists and the reduction in the migrant population caused by the epidemic are important external factors.

As far as the product itself is concerned, in recent years, South Korea’s emerging low- and medium-priced brands and online popular products have continued to appear, and the competitiveness of established beauty products has been challenged.

And consumers' demand for low-priced cosmetics is gradually decreasing, especially female consumers in their twenties and thirties pay more attention to product quality.

South Korean beauty giant Amorepacific’s 2021 interim financial report shows that in Korea, ultra-high-end beauty brands represented by Sulwhasoo, HERA, and Amorepacific have increased by 18% year-on-year; high-end brands represented by IOPE, Lange and CUBE ME In South Korea, an increase of 22%; while the popular beauty and wash care sectors represented by Ryo and Happy Bath fell by 8%.

In terms of prices, subject to store rents and labor costs, the same products are often sold at higher prices in specialty stores than online purchases. And price-sensitive consumers who are still willing to shop in physical stores usually shop around and buy a variety of products at once;

In addition, compared to beauty shops, a collection of different brands, including food, daily necessities, and other products are more popular.

Facing the survival crisis, these established cosmetics companies are also actively exploring transformation strategies.

Magic Forest intends to reduce the scale of domestic physical stores and expand sales channels by entering beauty collection stores. The company also intends to enter the hot pet snack track, and for its mainstay cosmetics business, it will continue to generate revenue through online and overseas distribution channels.

Natural Paradise is planning to expand into overseas online markets such as Southeast Asia. ABLEC&C plans to promote three growth strategies: expanding overseas markets, strengthening online channels, and achieving offline efficiency.

However, the industry is currently not optimistic about its transformation strategy expectations. South Korea’s "BizFACT" website quoted industry stakeholders as saying that although the pet food and functional health food markets are still growing, food companies are also actively deploying, and the competition is fierce. It is not easy for cosmetics companies to get a share of the pie.