The recent One Asia Beauty Forum hosted by Korea Cosmetic Association (KCA) in Beijing China on November 24, 2014 serves as a platform for communications between China and South Korea’s cosmetics industry.
Of particular interest was the balance of trade between the two countries. In the past three years, Korea had a favorable trade balance over China. In 2011, Korean cosmetic exports to China were USD60 million; in 2012 this figure increased to USD99 million and in 2013 reached USD1.5 billion. In contrast, Chinese cosmetic exports to Korea were USD18 million in 2011, USD15 million in 2012 and USD17 million in 2013.
It is expected that the market share occupied by Korean cosmetics in China will further increase after President Park Geun-hye’s recent visit to China. In the future a 30% reduction in consumer tax is expected.
Korean Cosmetics in the Chinese Market
With increasing growth of sales in China, KFDA officials revealed the key factors for successful entry into the Chinese market for Korean cosmetic brands:
1. Branding
Brands are the number one consideration for Chinese consumers when selecting a cosmetic product. A cosmetic brand needs to be well established and already reputable in Korea before entering the Chinese market; otherwise, finding a prestigious local partner in China could be another option.
2. Price, Quality & Building a ‘loyalty club’
Market research shows that most purchases of cosmetics in China are from word of the mouth. 65% of cosmetics consumers in China are between 20-30 years old; 68% of consumers are satisfied with the quality and effectiveness of Korean cosmetics; 80% of them consider Korean cosmetics are of decent price and 86% of them would purchase high-end Korean cosmetics again and recommend them to friends.
A Brief Overview of the Korean Cosmetics Market
AN Jeoung Rim, Vice-President of KCA stated: the total market size of Korea’s cosmetic market has reached 7.9 trillion KWR. There are 1692 manufacturers and 4816 distributors including direct sales, discount stores and exclusive shops. Cosmetics exports amount to 2 billion US dollars trade balance and with an annual growth rate of 11.4%.
In the early ‘60s, demand for cosmetics in Korea started to increase. From ’60s to ’90s, the cosmetics industry grew rapidly: In the ‘60s, Amore Pacific Group introduced the concept of ‘direct sales’. In the ‘90s, different sales channels such as supermarkets, telecommunications and drug stores were very successful. In the late ‘90s after the Korean financial crisis when the economy started to recover e-commerce also came to prominence. Meanwhile, foreign cosmetic brands started to flow into the Korean market creating increased competition; however, local brands have always been more favored than foreign brands. Nowadays, Korea ranks 10th in the global cosmetics markets, which is pretty good for a country with a population of just 50 million.
After 2000, cosmetics OEM/ODM started to prevail. AN Jeoung Rim revealed: in the future, exclusive shops are going to be the largest sales channel, TV shopping and internet shopping are going to be the second and third largest sales channel. On the other hand, personalization and differentiation of cosmetics products is very important to sustain the development of Korea’s cosmetics industry.
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