During the last decade, Korean women have become more receptive to western health and beauty products. Korean women spend as much money per capita on cosmetics and skin care products as do the French and the Japanese. At USD 130 per person for cosmetics, Koreans have one of the highest consumption rates in the world. As more Korean women are entering the labor force and seeing their disposable incomes grow, they have become avid users of imported cosmetics, yielding significant gains for U.S. suppliers. Other trends have developed in tandem with the continued strong expansion of the Korean market for imported cosmetics that is causing increasing demand for certain cosmetic subsectors. Korea is experiencing a strong “well-being” trend, and as a result they are seeking out natural and/or “green” cosmetics products. Also, since Korean women want to appear younger and healthier, functional cosmetics or so-called ‘cosmeceuticals’ that focus on anti-aging, whitening, and anti-ultraviolet care have become very popular. Another trend is that Korean men are also becoming significant consumers of cosmetics, providing opportunities for cosmetics companies featuring men’s lines.
The Korean cosmetics market continues to be polarized, with products focused at the premium end and at the lower-priced, mass-market end. Thus, cosmetic companies focus their offerings towards two distinct groups of consumers or target audiences: consumers shopping at low-cost cosmetics franchise stores and those shopping for high end luxury cosmetics at more expensive department stores. The ratification of the U.S. - Korea Free Trade Agreement (KORUS FTA) promises strong advantages for U.S. exporters as Korean tariffs on imported U.S. cosmetics would be eliminated over a three to ten year period after ratification. These market trends offer good opportunities for U.S. companies in the years ahead.
Foreign cosmetics companies often identify that the importation process is unnecessarily complex, time-consuming and opaque. In response, the Korean government has announced that it will increase the budget to hire more personnel to handle the Korea Food and Drug Administration’s (KFDA) testing and approval process due to the increasing number of cosmeceutical products entering the market.
Sales of men’s cosmetics is estimated to continue to expand with 2008 sales expected to reach USD 563 million. This growth reflects the trend that men have expanded their interest from simple skincare to other cosmetics, such as facial scrubs, facial masks, congealers, SPF products, and other cosmeceutical products. With this trend, men’s skincare salons have opened in business districts, providing one-stop total beauty and hair care services including hair cutting, perms, treatments, as well as facials. To meet this increasing demand for men’s skincare products, many department stores have opened men’s cosmetics counters on the men’s floor featuring recognized international brands like Clinique, Clarins, and Biotherm that offers after-shave lotions, cleaning foams, facial scrubs, facial packs, essences, and other functional cosmetics.
According to research from the Korea Cosmetic News, skin care products make up about 15 percent of the total cosmetics market, or about USD 903 million. Imported cosmetic skin care products accounted for about 50 percent of the USD 903 million, or USD 451.7 million.
- Men’s Cosmetics
- Natural/organic Skincare Products
Cosmetics/cosmeceuticals retail distribution channels have expanded in the last several years. The recent introduction of on-line shopping malls, television home-shopping channels such as QVC, pharmacies/drug stores, and catalogue orders have emerged as challengers to traditional retail channels such as direct selling, multi-level marketing, "mom and pop" stores, specialty retail establishments, department stores, discount stores, etc.
There are currently three major franchised drug stores competing in the local market, Olive Young by CJ, W-Store by Kolon, and GS Watson’s by GS in partnership with Watson’s. These retailers target customers focusing on wellness products by providing organic/natural cosmetics, nutritional supplements, OTC drugs, and general consumer goods. U.S. companies should seek opportunities in line with this new retail concept.