The fast growth that South Korea’s beauty market reported for the past several years has begun to slow. Although total sales were up 7.7 percent to $8.49 billion in 2011 and the prestige segment saw an increase of 7.6 percent to $3.74 billion, according to Euromonitor, this year the market has been less buoyant. By mid-2012, the beauty market was estimated to be flat as consumer spending slowed.
Perhaps one of the challenges, at least in the prestige sector, is the rise of competing brands and alternatives to the department store. The mono-brand road shop channel, which is dominated by players such as Missha, Etude House and LG-owned The Face Shop, is seeing dynamic growth. The channel is seeing success with its offer of low-priced goods and ability to target young, trendy consumers. “Road shops are popping up like mushrooms and their operators, mainly major Korean beauty groups like Amore Pacific and LG, are creating brands to increase the number of their shops,” said Katalin Berenyi, founder of Korea-inspired beauty brand, Erborian. These stores also are not necessarily built to last say industry sources; the same manufacturer tends to rebrand the stores every few years to satisfy the novelty-hungry Korean consumer.
These shops’ combination of aggressive price strategies and fast-paced launch schedules are attracting young consumers, who are more fickle than their older counterparts. “Koreans are some of the most quality-conscious consumers, but they also have a knack for good deals, which is why we have seen the emergence of retailers like Missha and Etude House,” comments Martin Roll, CEO of strategic advisory firm Martin Roll Company. “This consumer likes colors, stories, images and low prices and wants to flit from one brand to another. While this is typical of young consumers throughout Asia, it is particularly the case in Korea,” Erborian’s Berenyi notes.
To read BW Confidential’s full report on the South Korean market go to: www.bwconfidential.com/