Due to the rise in demand for K-Beauty products in the United States and Asia, exports of cosmetics in Korea went up 16% in 2020 to $7.5 billion (data collected by the Korea Customs Service and the Korea Cosmetic Association). This means that South Korea is currently the 9th largest cosmetics market in the world (2.8% of the global market). The reason for the demand for Kbeauty products around the world has a lot to do with the rise of Korean culture around the world. The boom of South Korean entertainment such as Kpop, Kdrama, Korean movies, and Korean goods has attributed greatly to the rise of the Korean cosmetic industry on a global scale.

China continues to be South Korea’s top market for the export of cosmetic products. In 2020, the exports of cosmetic products to China reached an all-time high of $3.8 billion. This means that China accounts for over half of the total yearly exports of cosmetics from South Korea. However, South Korea has seen its exports grow in other countries such as the United States, Japan, France, and England over the years. Let’s deep dive into the Korean cosmetic industry as a whole to get a better understanding of what the future holds for the industry. 

The Top 3 Health and Beauty Stores in Korea

We can’t start to talk about the Korean cosmetic industry without mentioning the top 3 health and beauty stores in Korea. These companies pretty much hold most of the power in the cosmetic market in Korea. Combined they have over 1,500 stores all across South Korea. Olive Young focuses on selling the more established beauty brands while Lalavla and LOHR are known to showcase new brands and products. Therefore, brands that are new and just starting out need to target the latter.

Olive Young

Korean Cosmetic IndustryCJ Group’s Olive Young is the #1 health and beauty store in South Korea and the others do not even come close. They first opened in Gangnam back in late 1999, and focus mainly on natural and healthy beauty products. They sell everything from cosmetic accessories, beauty supplies, skincare, and even food/beverages. Basically, Olive Young has everything you will need when looking for health or beauty products in Korea. Moreover, they don’t just sell Korean beauty products. They also sell imported cosmetics from around the world. In addition, if you have a CJ one membership card you can get cashback discounts. Currently, there are over 1,200 Olive Young stores in South Korea.

Lalavla

Korean Cosmetic Industry LalavlaLalavla is the result of a rebrand of Watsons in Korea. GS Retail did a complete rebrand back in 2017 to target millennials. They made the switch to focus on beauty products that focused on natural, organic, and eco-friendly items to appeal to socially conscious shoppers. Therefore, all the products sold at their stores are made of recyclable packaging. In addition, if you have a GS25 membership, consumers get additional monthly discounts that can range between 10-15%. They account for over 200 stores in South Korea.

LOHB

lohbLotte is the parent company of the personal and beauty care store brand LOHB. They have begun to merge LOHB stores with their supermarket chain Lotte Mart. The first LOHB store was launched in Seoul (Hongdae) back in 2013. Currently, they have around 100 stores in South Korea with most located inside Lotte Mart locations.

Koreans Love for Foreign Cosmetic Brands

Foreign Brands in KoreaGlobal brands have been known to acquire Korean beauty companies. Estee Lauder bought Dr. Jart+ in late 2019 for $1.1 billion. Goldman Sachs bought a minority stake in GP Club Co., makers of Kbeauty facemasks. Unilever, NIVEA, and L’Oreal also have stakes in Korean cosmetic companies. Global brands understand the power of K-Beauty. 

For global brands looking to break into the South Korean market, the good news is that there is a demand for foreign cosmetic products in Korea. Imports of global cosmetics into Korea stand at $1.5 billion. France comes in #1 at 30% with $453 million worth of imports. The United States comes in 2nd at 23% with $345 million. and Japan comes in 3rd at 17% with $257 million of cosmetic imports into South Korea. Of these cosmetic imports, close to half of the imports are for skincare cosmetics. Haircare products come in 2nd at 15%, 14% for makeup cosmetics, and 11% were for perfumes. Foreign cosmetic brands such as Dior, Yves Saint Laurent, Chanel, Estee Lauder, and L’Oreal have found great success in South Korea. This is unlikely to change moving forward.

The reason for this is that Koreans are starting to buy foreign brands at the same prices as it is sold abroad. More and more global brands are offering overseas shipping and expanding their marketing to target a wider audience. US brands especially will likely see a great opportunity in 2021 to enter the South Korean market. The United States and South Korea have a trade agreement called the US-Korea Free Trade Agreement which was formed back in 2012. Under the agreement, all Korean tariffs on imported US cosmetics were eliminated in 2021. This also means that more Korean brands will be imported into the United States. Therefore expect to see Korean brands show up more often in cosmetic stores all across the United States in the coming years.

The Korean Beauty Culture

K-Beauty MakeupThe way you look is very important not just for women in Korea but also for men. Korean culture puts a lot of value on appearance and beauty. So much so that most jobs in Korea require you to add a picture of yourself to your resume. Therefore, Kbeauty products, Korean fashion, and plastic surgery in Korea are always on the rise. These industries in Korea are some of the most competitive industries in Korea. Brands are constantly investing money into R&D to develop new and innovative products in order to stay ahead of the competition. This is why there are so many beauty startups in Korea. Bigger brands are constantly scouting beauty startups to find the next big product or service they can incorporate into their company. 

Korean women are not the only ones buying cosmetics in Korea. Korean men are also helping to drive the cosmetics market. Out of all the men in the world, Korean men spend the most on cosmetics. Some of the more popular products used by men include moisturizers and toners. Makeup is also bought by Korean men. The top makeups bought by Korean men are eyebrow liners, lip balms, and foundations. In addition to this, Korean men also get beauty treatments on a regular basis. Korean celebrities help with the sale of Korean beauty products in Korea. They also want to emulate the same look of their favorite Kpop Idols and Korean actors.

The Average Korean Beauty Consumer

The first thing to understand about the average Korean beauty consumer is that they are very tech-savvy. South Koreans in general are very receptive to the latest tech trends. This is because South Korea is the country with the highest smartphone ownership, broadband penetration rate, and the fastest average internet speed. Therefore more and more Koreans are shopping not just on websites but on their mobile phones. Furthermore, COVID-19 has accelerated the shift to online and mobile in the cosmetics industry. Brands in Korea understand the importance of having a strong digital presence to target future customers. 

The Korean National Statistical Office has stated that the cosmetics online shopping transactions were above $13.1 billion in 2020. Of these, mobile cosmetics transactions accounted for $8.2 billion (Over 60%). This is why brands in Korea focus heavily on marketing on social media channels like Instagram, Facebook, Twitter, Kakao, YouTube, etc. Social Media is the key marketing tool for many Korean cosmetic companies. The average Korean beauty consumer is very knowledgeable about cosmetic products. Not only do the products have to be great but they have to be at a reasonable price. In addition, they need to offer something different to US brands. They can’t copy but rather need to be the ones setting the beauty trends. 

Hottest Trends for the cosmetic industry in Korea for 2021 

Cosmeceuticals

Cosmeceuticals are cosmetics that have or claim to have medicinal properties. In previous years, the keywords such as anti-aging, antioxidant, skin brightening, sun protection, and anti-pollution were the hottest targets for the cosmeceutical industry. Korean brands have tested many ingredients from traditional Korean herbs to all forms of extracts (even snails). However, the Korean government regulations for both functional cosmetics and cosmeceuticals. This industry alone is a $1 billion industry in Korea. 

Sustainability

In December of 2019, South Korea implemented the Recycling Act which impacts all products sold in South Korea. This means that cosmetic brands had to focus on sustainability for all their products. The use of plastic materials that are difficult to recycle such as PVC and colored PET bottles is now banned in Korea. Therefore, the consumers in Korea are seeking more natural and environmentally-friendly ingredients in their beauty products more than ever. However, this does not just apply to ingredients but packaging as well. Furthermore, cosmetics brands in Korea that focus on sustainability sends a message to consumers that the brand is committed to gaining their trust in regards to safety and social awareness.  

Organic Ingredients

Currently, if cosmetic brands are not using natural/organic products, they are going to get left behind. These days, animal testing is a brand killer. YouTube videos showcasing the abuse of animals for beauty testing have made brands move towards a more ethical way of doing R&D. Many Korean beauty brands today focus on plant extracts (rose, lavender, mint, etc) and oils that naturally help protect, nourish, and hydrate the skin. The latest trend in South Korea has beauty brands partnering with local farming communities for ethical sourcing collaborations. 

Personalization

Consumers in Korea want solutions that target their specific needs. While they are open to trying new products, there is a growing demand to be able to customize beauty products in all categories. Therefore, consumers in Korea want to be involved in the products they buy. For example, there are now skincare brands in Korea that offer tailor-made skincare products by analyzing their customers using an app. The app by AMOREPACIFIC can measure the consumer’s facial dimensions, generate a skin diagnosis, and sends the information to a special 3D printer which can then print a hydrogel facial mask that is tailor-made for the consumer. The printing takes less than 5 minutes. 

AR Makeup Experience

Augmented reality is the future of online makeup tutorials. Many offline beauty stores in Korea are now offering an in-store AR mirror or app that acts as “Virtual Assistants” to help consumers tap and try on makeup products virtually. There are also virtual tutorials that will not only help you apply makeup but also offer recommendations by scanning the user’s face.

The Top 2 Cosmetic Producers in Korea

AMOREPACIFIC

Korean Cosmetic IndustryAMOREPACIFIC is the top beauty and cosmetic producer/conglomerate in Korea. They operate over 30 beauty, health, and personal care brands. Some of these brands include Sulwhasoo, Etude House, and Innisfree. They are the world’s 12th largest cosmetic company.

LG Household & Health Care 

LG Household and CareThe very first cosmetic product and first toothpaste were launched by LG. Currently, LG Household & Health Care is one of the top producers of cosmetics and personal care products in Korea. Some of their brands include SU:M37, The History of Whoo, and The Face Shop. In 2014, they acquired a Korean cosmeceutical company, CNP Cosmetics to keep up with the latest cosmetic trends. They are currently the second-largest cosmetics company in South Korea.

Regulations for the Korean Cosmetic Industry

The Ministry of Food and Drug Safety is responsible for the regulation of the cosmetic industry in Korea. Cosmetics are divided into two sections. Functional cosmetics and regular cosmetics. Functional cosmetics are products that help with whitening, anti-wrinkle, sunscreen, tanning, hair colorants, hair nutrients, and skin damage. The Ministry of Food and Drug Safely review functional cosmetics for pre-market approval. Regular cosmetics are reviewed by the Korea Pharmaceutical Traders Association (KPTA).

How Cosmetic Brands Sell their Products to Korean Consumers

Korean Cosmetic IndustryThe top strategy that cosmetic brands in Korea use to sell their products is with Korean celebrities. Celebrity endorsements in Korea are one of the best ways to sell products in Korea. Even more so than using social media influencers. Koreans want to use products that are popular with Kpop Idols or Korean Actresses. Brands pay these Korean celebrities a lot of money to promote their products through advertisements and even through social media. 

KBeauty has already set itself up nicely through its 10-Step K-Beauty routine made famous by Soko Glam. This means there are 10 products that are needed to complete a K-beauty routine! Talk about a great marketing strategy. You add this to the use of social media and you can see why Kbeauty products have been so popular. Brands in Korea understand this. This is why many of the products focus heavily on the packaging that is easily shareable on social media channels like Instagram, TikTok, and Facebook. Therefore most products have a sleek, fun, and colorful design that social media influencers want to share with their followers. 

The typical timeline from the planning to launch of a Kbeauty product takes 3-6 months. However, many brands are looking to lower this timeline to under 3 months to get capitalize on the latest trends. They rely on marketers and influencers to keep track of the latest cosmetic trends to incorporate into their products. Once a hot trend is identified, the clock starts ticking to get the product out on the shelf as quickly as possible.

The Future of the Korean Cosmetic Industry

COVID-19 has accelerated the movements towards the digital space for the cosmetic industry in Korea. As we recover from the coronavirus pandemic, Korean Beauty brands will need to focus on technology to streamline their business. The world is becoming more and more digital and the competition within Korea is getting harder and harder. Going global is a must for many brands in Korea which is why they need to not only invest in Korean media channels/platforms like Naver/Kakao but also in global channels such as Google/Facebook. It is now more important than ever to produce content in English for the global masses.