deep dive: korean innovation in beauty · 11/16/2016 · innovative marketing strategies that have...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

D E B O R A H W E I N S W I G

M a n a g i n g D i r e c t o r , F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

Koreanbeautybrandshaveseenstronggrowthinsalesvolume,with exports reachingUS$2.45 billion in 2015. Korean brandshave had a growing influence on the global beautymarket inrecentyears,leadingtoaK-Beautytrend.

In this report, we examine the factors that underpin thesuccessful ascent of Korean beauty, with a focus on theproduct,processandtechnologyinnovationstheyhavebroughttothemarket.Hereareourkeytakeaways.

1) Korean beauty brands have adopted a “fast fashion”product development cycle and gained recognition forinnovative formulas, ingredients, manufacturingprocesses and packaging. However, the sophisticatedand demanding customers in the local Korean markethavealsobeenoneofthemajordrivers.

2) Korean beauty brands have embraced the digitaltransformation age and have taken advantage of thecultural influenceof the Koreanwave to comeupwithinnovativemarketingstrategiesthathavedrivengrowth.

3) Korean beauty brands were also fast to adopt in-storetechnologies, some of which are on par with othertechnology developed by international beauty brands,whileothersareaheadoftheinternationalmarket.

4) AnumberofKoreanbeautystartupshaveemergedthathave broughtKoreanbeauty products overseaswith e-commerce,or created innovativebeautyproductswiththelatesttechnologies.

DEEP DIVE: Korean

Innovation in Beauty

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TABLEOFCONTENTS

EXECUTIVESUMMARY......................................................................................................................................2

THESUCCESSOFKOREANBEAUTYBRANDS......................................................................................................4

INNOVATIONINPRODUCTDEVELOPMENT.......................................................................................................5

HEAVYINVESTMENTINR&D.................................................................................................................................5

ADAPTINGTHEFAST-FASHIONPRODUCTDEVELOPMENTCYCLE.........................................................................6

INNOVATIONINPRODUCTS,FORMULASANDINGREDIENTS...............................................................................6

INNOVATIONINPROCESSINGTECHNOLOGY........................................................................................................8

INNOVATIONINPACKAGING................................................................................................................................8

INNOVATIONINMARKETINGSTRATEGIES........................................................................................................9

EMBRACINGTHEDIGITALTRANSFORMATIONAGE..............................................................................................9

RIDINGONTHEKOREANWAVE..........................................................................................................................10

DEPLOYMENTOFIN-STORETECHNOLOGY......................................................................................................12

KOREANBEAUTYSTARTUPS............................................................................................................................14

ONLINEBEAUTYRETAILSTARTUPS.....................................................................................................................14

EMERGINGBEAUTYBRANDS..............................................................................................................................15

BEAUTYTECHNOLOGYSTARTUPS.......................................................................................................................16

IMPLICATIONSFORINTERNATIONALBEAUTYBRANDS...................................................................................17

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EXECUTIVESUMMARYKoreanbeautybrandshaveseenstronggrowthinsalesvolume,aswellasagrowing influence in theglobalbeautymarket in recentyears.Thishasledtomarket-sharegainsintheglobalbeautyandpersonalcaremarket.

InnovationisoneofthestrengthspossessedbyKoreanbeautybrands,andthisisendorsedbyitsconsumers.AstudybyNielsenin2015showedthat6 out of 10 Korean beauty brand shoppers from Greater China andSingapore consider Korean products innovative. This perception is thestrongestamongmainlandChineseshoppers–68%ofthembelieveKoreanbeautyproductsareinnovative.

The innovative image that Korean beauty brands have is not purely aperception.Wecanfindinnovationinallfacets,fromtheproduct,processandtechnologyinnovations,tothepackaging.

• Innovation in product development is driven in part by the heavyinvestment in R&D, and also by the expectations of thesophisticatedcustomersinthelocalKoreanmarket.Thiscreatesanidealplatformforbeautybrandstocreateandtesttheirinnovations,including formulas, ingredients, manufacturing processes andpackaging.

• The shorter product development cycle compared with theinternational players helps Korean beauty brands respond morequickly to evolving consumer demands, and remain relevant withcustomers.

• Koreanbeautybrandshavebeen leveraging thegrowing influenceof digital media to engage with customers while capturing theopportunitiesbroughtforwardfromtheKoreanwave.

• Koreanbeautybrandswerealsofasttoadoptin-storetechnologies,some of which are on par with other technology developed byinternational beauty brands, but others are ahead of theinternationalmarket.

• A number of Korean beauty startups have emerged that havebrought Korean beauty products overseas with e-commerce, orcreatedinnovativebeautyproductswiththelatesttechnologies.

ThishasdifferentiatedtheKoreanbeautybrandsfromotherinternationalbeautybrands,andcontributedto their success in thehighlycompetitivebeautymarket.

Source:Shutterstock

InnovationisoneofthestrengthspossessedbyKoreanbeautybrands,andthisisendorsedbyitsconsumers

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SkinCare66%

ColourCosmeMcs34%

Skin Care 66%Facial Care 51%BodyCare 9%Sets/Kits 4%HandCare 2%

THESUCCESSOFKOREANBEAUTYBRANDSTheglobalbeautycaremarketwasvaluedatUS$167billion in2015.Skincare products comprised 66% of the total sales, while color cosmeticsaccounted for the remaining 34%. The total market size is expected togrowtoUS$198billionby2020,accordingtoEuromonitorInternational.

Figure1.GlobalBeautyCareMarketCompositionin2015

Source:Euromonitor

The Korean beauty industry has been growing rapidly, exports of Koreancosmetics have been increasing by an average of 36.9%every year since2011, and reaching US$2.45 billion in 2015, according to the KoreanCustoms Service. Last year, South Korea overtook the US and Japan tobecomethesecond-largestcosmeticsexportertoChinaafterFrance,withatotalexportvalueofUS$1.1billion,accordingtotheMinistryofFoodandDrugSafetyofKorea.

According to Euromonitor International, both AmorePacific Corp and LGHouseholdandHealthCareLtdarerankedamongstthefivemostdynamiccompaniesintermsofvalueshareexpansioninglobalbeautyandpersonalcare,purelythroughorganicgrowth.

Figure1.TheFiveMostDynamicCompaniesinTermsofValueShareExpansioninGlobalBeautyandPersonalCare

Company Percentagepointincreaseinshare

Marketvalueranking20102015

UnileverGroup 1.1 3 3

EstéeLauderCompanies 0.4 8 5

AmorePacificCorp 0.4 25 16

LGHousehold&HealthcareLtd 0.3 31 22

L’OréalGroup 0.3 2 2

Source:Euromonitor

Lastyear,KoreaovertooktheUSandJapantobecomethesecond-largestcosmeticsexportertoChinaafterFrance,withatotalvalueofUS$1.1billion.

ColorCosmetics34% FacialMake-Up12% EyeMake-Up9% NailProducts4%

Sets/Kits2%

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Figure2.KeyCosmeticsBrandsoftheTop-twoKoreanBeautyCompanies

Company KeyBrands

AmorePacific Sulwhasoo Apremiumbrandwithaholisticandharmoniousskincare approach, featuring skincare solutionsfromAsianmedicinalherbs.

Laneíge A mid-range brand positioned as a “MoistureExpert”, featuring hydration-packed productscombined with cutting-edge water technology.The first Korean beauty brand to reach annualsalesofKRW1trillion(US$896million).

Innisfree A mid-range, naturalistic-oriented brand, whichuses organic ingredients directly sourced fromJeju island in Korea, certified by ECOCERT ofFrance.

EtudeHouse

A mass-market brand that targets youngercustomers.Thebrandfeaturesproductswithhighaffordability, lovely design and a diverse colorrange.

LGHousehold&Healthcare

TheHistoryofWhoo

A premium brand that features traditional royalbeauty formulae, with products developed withorientalmedicinetoresolveskinproblems.

TheFaceShop

A mass-market brand with products made fromnatural ingredients. It has over 1,000 outletsaround19countries.

Source:AmorePacific,LGHousehold&Healthcare,EssentialBeauty

INNOVATIONINPRODUCTDEVELOPMENTKorean beauty products are renowned for being at the forefront ofinnovation. Mary Schook, an acclaimed New York-based licensedaesthetician, makeup artist and owner of MS Apothecary, estimatesKoreanbeautyproductsare12-14yearsaheadofthoseoftheUS.ThisisinpartdrivenbytheheavyinvestmentinR&D,andalsobytheexpectationsofthesophisticatedcustomersinthelocalKoreanmarket.

HeavyInvestmentinR&D

Korea is the fifth-largest country investing in R&D in the industry, withUS$64.3 billion spent in 2014, according to the Industrial ResearchInstitute.Thecountryhasrecentlyrolledoutastrategicplantobecomeaglobalpowerhouseinthebio-healthindustry,andcosmetics isoneoftheareas inwhichmore R&D investmentwill bemade. Under the plan, theKorean Ministry of Health and Welfare will support expanding R&Dinvestmentinanti-ageingproductsandothercosmeticsproducts.By2020,theKoreangovernmentexpectsthetop-twoKoreanbeautycompaniestoenterthetop10companiesinthebeautyindustryintermsofrevenue.

AccordingtoMarySchook,alicensedaestheticianandownerofMSApothecary,Koreanbeautyproductsare12-14yearsaheadofthoseoftheUS.

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Figure3.GrossExpendituresonR&D(GERD)in2014

CountryGDP(PPP)

BillionR&D

As%ofGDPGERD(PPP)

Billion

1.UnitedStates 17,460 2.78% 485.39

2.China 17,630 1.95% 343.78

3.Japan 4,807 3.40% 163.44

4.Germany 3,621 2.85% 103.20

5.Korea 1,786 3.60% 64.30

6.India 7,277 0.85% 61.85

7.France 2,587 2.25% 58.21

8.Russia 3,568 1.50% 53.52

Source:IndustrialResearchInstitute

Theeffortsat innovationbytheKoreanbeautycompaniesarerecognizedin Forbes list of the world’s most innovative companies. In 2016,AmorePacificandLGHousehold&HealthcareLtdfoundthemselvesonthelist, ranked 21 and 19, respectively. Other companies on the list includeTeslaMotors,UnderArmour andAmazon.Unilever Indonesia is theonlybeautyandpersonalcareproductcompanythatrankshigherthanthetwoKoreanbeautycompanies.

AdaptingtheFast-FashionProductDevelopmentCycle

Korean beauty brands have a shorter product development cycle thantraditional beauty brands, similar to the “Fast Fashion” approach.According to Lim Dae-gyu, a director at Cosmax Inc, a Korean cosmeticscompany,Koreanmass-marketbrandstakejust4-6monthsfromplanningtolaunch,whereasglobalbrandstakeoverayeartogothroughthewholeprocess.

ThisshorterdevelopmentcyclehelpsKoreanbeautybrandsrespondmorequickly to evolving consumer demands, and remain relevant withcustomers.

InnovationinProducts,FormulasandIngredients

Koreanwomenarededicated to looking good, and this leads to ahigherdemand and standard for skin care. According to a BBC report in 2015,Koreanwomenspend twiceasmuchof their incomeonbeautyproductsand make-up as their American counterparts. Korean beauty consumersarealsocurioustodiscoverthelatestandnewestproductsinthemarket,andarewillingtodiversifytheirskincareportfolio,saysEstherDong,SeniorVicePresidentatAmorePacific. This sophisticated consumerbase createsanidealplatformforbeautybrandstocreateandtesttheirinnovations.

The growing popularity of Korean beauty product started with the BBCream, which had already been sold in Korea for over 20 years. It firstbecameavailable in theUS in2011, andmajor cosmeticsbrands suchasChanel, Estee Lauder, L'Oréal and Shiseidohave also launched their ownBBCreamproducts.

AccordingtoaBBCreportin2015,Koreanwomenspendtwiceasmuchoftheirincomeonbeautyproductsandmake-upastheirAmericancounterparts.

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Figure4.MajorKoreanBeautyInnovations

Product Description

BB/CCCreams “BB”standsfor“BeautyBalm”.It is amulti-purposeblendedmakeupand skincareproduct,which contains non-brightening primer, light foundation,moisturizerandsunscreen.“CC”standsfor“ColorCorrective”.It offers additional coverage compared with BB Cream,includinglightertextureandimprovedtonecorrection.

CushionCompacts

Makeupcompactsthatcomewithasponge,whichissoakedin a BB cream or a light foundation formula, and preventsspillage. The user can touch up their makeup withoutbreakingoutatubeofcreamorworryingabouttheresidualgunkontheirfinger.

SheetMasks Sheetmasks are face-shaped sheet fabrics, usuallymadeofpaper, fibers or gel types. They are soaked in serum fordifferent specific purposes. Sheet masks are different fromfacialmasksforwhichrinsingisnotrequiredafteruse,whichmakesthemconvenientandeasytouse.

Source:LuxuryDaily,KoreaTimes,SytleCaster

Korean beauty brands have a reputation for using natural, herbal andsometimesunusual ingredients intheirproducts,whichisaverydifferentapproachcomparedwithtraditionalbeautybrands.

Sulwhasoo, AmorePacific’s premium skincare brand, specializes in usingAsianherbsinitsskincaresolutions.Oneofthekeyingredients,Ginseng,isthemainfunctionalingredientinitsanti-agingandwhiteningproducts.

Source:Shutterstock

Korean beauty brands have explored every possibility in terms ofingredients, well beyond one’s imagination. One of the most prominentexamples is snail slime,which helps to tighten and smooth the skin. Theingredient is found inanumberofproducts ranging fromsheetmasks tocreams. Other unusual ingredients include bee venom, camel milk andstarfishextract.

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InnovationinProcessingTechnology

Koreanbeautybrandshaveinnovatedinwaystoprocessingredients,oneofwhichisfermentation,whichisametabolicprocessthatconvertssugartoacidsandenzymesbyusingyeastorbacteria,similartotheprocesstoproducethetraditionalKoreanfoodKimchi.

Byapplyingthistechnique inskincareproducts, fermentationhelpsbreakdown the active ingredients so that the nutrients and antioxidants aremore readily absorbed by the skin. It helps to boost the effectiveness ofingredients, especially in the areas of hydrating skin, refining pores,brighteningskinandanti-aging.

Whamisa is an organic skincare brand launched by ENS Beauty Group in2010, it features naturally fermented ingredients including flowers, fruitsandseeds,andoffersafullrangeofproducts,includingskincare,make-upcare, body care, hair care and baby care. The brand is one of the firstcosmetic brands to use fermentation in skincare, and has successfullydifferentiateditselffromthehighlycompetitivebeautymarketinKorea.

Source:Whamisa

Beauty giant AmorePacific is also an early adopter of the fermentationprocess in its skincareproducts. The company first released “Hyosiah” in2010,whichcomprisesfermentedsoybeansthatcontainarareisoflavonemarketed as CureBEAN; this antioxidating ingredient helps to removetoxinsandnormalizeskinregenerationeffectively.

InnovationinPackaging

Korean beauty brands are also innovative when it comes to productpackaging. In an interview with Beauty Packaging Magazine in 2016,Michelle Joo, vice president of Elcos America, a skincare packagingcompany, pointed out three Korean trends in beauty product packaging,namely“Ki-dult”cosmetics,customizableproductpackagingandpackagingthatemphasizesformulationcontents.

“Ki-dult” cosmetics carry the images of cute and well-known characters,however,thetargetmarketisnotchildren,butratheradults.Forinstance,TheFaceShophaslaunchedproductswithcharactersfrommessagingappLINE,aswellascushioncompactproductsfeaturingDisneycharacters.Theinitial 130,000 Disney products were sold out in just two days, and the

Koreantrendsinbeautyproductpackaginginclude“Ki-dult”cosmetics,customizableproductpackagingandpackagingthatemphasizesformulationcontents.

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company expects to launch about 600 new products in a similar fashionthisyear.

Customizableproductpackagingrespondstotheneedsofspecificneedsofconsumers.For instance, it isdifficulttogetaBBcreamthatmatchestheexactskintoneoftheuser.Lalavesi’sLeoPophascreatedarefillable“DualPact”,andwiththepushofabutton,BBandCCcreams,revealedbeneaththepalette,canbeeasilymixedtomatchanyskintone.

Ontheotherhand,Koreanbeautybrandsarecreatingproductpackagingthat better grab customers’ attention, aswell as emphasizes formulationcontents.SomehighlightsarethepeachhandcreambyTonyMoly,wherethepackagingintheshapeofapeach;asimilarapproachisusedbyNatureRepublicforitsAloeVera’shandcream.

Source:Lalavesi,TonyMoly

INNOVATIONINMARKETINGSTRATEGIESThe unparalleled growth of the Korean beauty brands can also beattributed to their innovation in termsofmarketing strategies– theyareembracingthedigitaltransformationageandridingontheKoreanwave.

EmbracingtheDigitalTransformationAge

Korean beauty brands have been leveraging the growing influence ofdigital media to engage with customers. In some markets the onlinechannelhassurpassedtraditionalmediawhenconsumers lookforbeautyinformation. ANielsen study in 2015 revealed that formainland Chineseconsumers, recommendations from friends, brands’ websites andfashion/beautywebsitesarethetop-3 informationchannelsforskin-care,surpassingtraditionalchannelssuchastelevisionandmagazines.

Source:Laneíge

For instance, Laneíge has launched its online platform to educateconsumers. The beauty brand debuted the “School of K-Beauty” on itswebsite,whichincludesvideocontentandastep-by-stepguidetoprovideconsumerswith the latest trendson k-beauty and techniquesonhow to

Koreanbeautybrandshavebeenleveragingthegrowinginfluenceofdigitalcontenttoengagewithcustomers.

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use the beauty products. For example, the beauty products andmakeupproceduresforSongHyeKyointhepopularTVdrama,DescendantsoftheSun,wasunveiledintheonlinevideo.

RidingontheKoreanWave

The popularity of Korean culture has been increasing both in Asia andaround the world. According to Korea Creative Content Agency, Korea’stotalculturalexportsreachedUS$5.3billionin2014,growingataCAGRof13.4% from2010, and is expected to reachUS$10.0billionby2017, at aCAGRof23.6%.

Figure5.Korea'sTotalCulturalExports(USDBil.)

Source:KoreaCreativeContentAgency

The term, Korean wave or, Hallyu was coined to depict the culturalinfluence of Korean dramas, movies, songs and even fashion, food andbeauty in Asian countries, especially China, and this has spread to otherparts of the world in recent years. A recent Korean TV drama titled,Descendants of the Sun, has been viewed more than 2 billion times onChina’s online streaming site iQiyi. This growing cultural influence isevident in the subtlety of a food combination of fried chicken and beer,knownaschimek,whichbecamepopularinChinaandSoutheastAsiaafterthepreeminentKoreandramaMyLove fromtheStar.Consumersappealto the lifestyledepicted in thedrama,whichtheybelieve isaccessiblebypurchasingtheproductssuchasfood,clothingandbeautyproducts.

Koreanbeautybrandshavebeenpioneers in capturing theopportunitiesbrought forward fromtheKoreanwave.Acommonmarketingstrategy istoenlisttheprotagonistsofpopularKoreandramasorKoreanPopstarsasspokespersonsforthebrands.Forexample,LaneígehasSongHyeKyo,theleadingactorinDescendantsoftheSun,asthebrandambassador.Yoona,whodebutedasamemberofthepopulark-popgroupGirls’Generation,isthebrandambassadorforInnisfree.

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Theterm,Koreanwaveor,HallyuwascoinedtodepicttheculturalinfluenceofKoreandramas,movies,songsandevenfashion,foodandbeauty.

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Figure6.BrandAmbassadorsofSelectedBrandsandProducts

Brand Product BrandAmbassador

EtudeHouse DearMyWishLipsTalk ChrystalSooJung

NatureRepublic MoistStemCream KimTae-yeon

Innisfree GreenTeaSeedSerum Yoona

TheFaceShop CoreSeedPurifyingEssence Suzy

Holika BloomInMultiBalm Dasom

Source:AmorePacific,Holika,LGHousehold&Healthcare,NatureRepublic

Anothermarketingtacticistoembedaproductinthedramaandintegratethe advertisement into TV commercials. For example, Song Hye Kyo hasmodeled foranadvertisement for theLaneíge lipstick,TwoToneLipBar.The same product has been used in a scene in Descendants of the Sunwbeforeshemeetstheleadingmalecharacter.Salesofthelipsticksoared400%thankstothissuccessfulmarketingtactic.

Source:AmorePacificPRCenter

Koreanbeautybrandshavealsoleveragedthepopularityofbeauty-centricshows inKoreaandacrosssomepartsofAsia,whereconsumersfindtipsand product recommendations from them. The most famous one is theweeklyshow,“GetitBeauty”,whichhasairedfornineseasonssince2006.It features a “Blind Test” session,where beauty insiders and experts areinvited toselect thebestproduct in respectivecategories.Responding totheshow’shighinfluenceandpopularity,retailerssuchasLotteDutyFreeandOliveYounghaverecentlysetupa“GetitBeauty”campaign,featuringproductsfromtheshow.

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Source:NaverBlog

DEPLOYMENTOFIN-STORETECHNOLOGY

Korean beauty brands are on par with international beauty brands inintroducingin-storebeautytechnology.Insomecases,suchaswithmobileapps, they have lagged the global players in introducing technologyelements to the consumer experience; however,with other technologiessuch as the VDL device introduced by LG’s beauty division, they haveshowntobemoretech-forwardthantheirwesterncompetitors.

BeautyMirror

Laneíge released its “BeautyMirror” app in August 2015, which enablescustomers to try on makeup and skin-care products using AugmentedReality on their smartphone. Laneíge has also installed large tabletsrunning the “BeautyMirror” app at its stores. This app is similar to the“MakeUpGenius”applaunchedbyL’OréaloneyearearlierthanLaneíge,whichhassimilarfunctions.

Laneíge’s“BeautyMirror”apprunningontablet,deployedinoneofitsstores.Source:ModiFace

Koreanbeautybrandshavefollowedcloselywiththeglobalplayersindeployingthelatesttechnology,andalsoinnovatedinahandfulofin-storetechnologiesaswell.

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We have also identified some digital tools and technology deployed in-storebyKoreanbrandsthatareaheadofwhatinternationalbeautybrandsare currently offering, and which help deliver amore differentiated andpersonalizedservicetotheircustomers.

“BeautyTalk”station

Innisfree, with a relatively young and digital-savvy customer base, haslaunched a dedicated “Beauty Talk” station, which measures thecustomer’sskinconditionsuchasmoisturelevel,wrinkledepthandclarity.This informationissyncedwiththeInnisfreemember’sapp,andabeautyadvisorcanthenrecommendproductsbasedontheresults.

Source:FungGlobalRetail&Technology

VioletDreamLuminous

LGHousehold&Healthcare’sVDL(VioletDreamLuminous)introducedtheVDL+PantoneColorIntelserviceinitsstores.Adeviceisusedtoanalyzethepantonecolorof thecustomer’sskinandthenrecommendsproductsthatmatchthecustomer’sskincolor.

Source:VioletDreamLuminous

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KOREANBEAUTYSTARTUPS

OnlineBeautyRetailStartups

AnumberofKoreanonline retail startupshaveemerged in recent years,andtheyhavecontributedtothegrowing influenceoftheKoreanbrandsbyintroducingthemtooverseasmarkets.ApartfromsellingproductsfromsmallerKoreanbeautybrands,theseonlineretailstartupshavededicatedblogswithrichcontentrangingfromproductreviewsandthelatestKoreanbeauty trends, to tips on using the products. This helps overseasconsumerstolearnmoreabouttheKoreanbeautyregime.MemeboxandPeach&Lilyaresomeofthesuccessfulonlineretailstartups.

Memebox: The startup first beganwith an online subscription service in2012,whereby itsendssubscribersaboxofselectedsamplesofmakeup.The company has quickly developed into an online retailer of beautyproducts.

Source:Memebox

Memebox’s success is largely attributed to the influenceof socialmedia,which helps to attract customers with rich online content from skincareguidestoproductreviews.Itnowhasover4millionfollowersglobally,andreceived70millionvideoviewsonitsFacebook.

The startup has achieved 280% year-over-year growth, and has recentlyraisedUS$66milliontoexpanditsbusiness.

Peach & Lily: This is the first online Korean beauty startup thattransformed into a multi-channel retailer, with two brick-and-mortarlocationsopening inMacy’sNewYorkandSantaAnitastores thisyear. Ithashelpedtheonlineretailstartuptoexpanditscustomerbase,as80%ofMemebox’sonlinecustomersarenon-Asian,while it isestimated thatupto90%ofthecustomersatMacy’sNewYorkstoreareofChinesedescent.

Source:Peach&Lily

AnumberofKoreanonlineretailstartupshaveemergedinrecentyears,andtheyhavecontributedtothegrowinginfluenceoftheKoreanbrandsbyintroducingthemtooverseasmarkets.

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EmergingBeautyBrands

NewKoreanbeautybrands, suchasNeogenandCosrx, haveemerged inrecent years, which have differentiated themselves with innovativetechnologies and concepts. They have reached overseas customers withthehelpofonlineretailstartups.

Neogenwasfoundedin2009,thisemergingbeautybrandisdubbedasarisingstarbyOliverYoung,oneofthelargestbeautyretailersinKorea.Thecompanyusesadvancednaturalscienceandbiotechnologytodevelop itsproducts, one of which is the six-core bio-technology, which helps tomaximizethebenefitsofnaturalingredients.

The company has also registered several patents for its technology,coveringareassuchasnaturalwhiteningmaterials,anti-inflammatoryanddetoxification natural medicinal herbs, as well as anti-aging research ofnaturalmaterialsbysupercriticalextraction.

Source:Rich&YoungCo.,Ltd

COSRXwas founded in 2014, with the philosophy of making ingredient-oriented and high-performance cosmetics. The company takes aminimalisticapproachtoskincarebyremovingallunnecessaryingredientsin its products. This helps to lower the chanceof an allergic reaction forconsumers with sensitive skin, as according to COSRX'sMarketing TeamAssistant Manager, Lee Hye-Young, it would be hard to tell whichingredientcausedthetroubleifthereweretoomanyingredients.

The two-year-old company currently sells online only to minimize costs.ButaccordingtoLee,planstoopenbrick-and-mortarstoresbytheendoftheyear,duetocustomerdemand.

Source:COSRX

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BeautyTechnologyStartups

WayWearable is a “beauty-appliance” startup that developed “Way”, apalm-sizedIoTdevicethatmeasurestheuser’sskinconditionandexternalenvironment, and offers personalized skincare tips accordingly viasmartphone. The more data the device collects about the user’s skincondition and environment, the better it can provide productrecommendations.

The startup was founded in 2014, and received crowd-funding totalingUS$127,642 for pre-orders on theUS site Indiegogo. It has also receivedUS$2.78millioninthreeroundsoffundingfromeight investors, includingbeautygiantAmorePacific.

Source:WayWearable

Evosonics has developed “Dr Spa”, asoundrhythmicmassagerforscalpandhair scaling. According to the startup,the massager has 10 times thecleansing effect of shampooingcomparedwithusingbarehands.

The startupwas founded in 2013, andalso develops acoustic resonanceproducts for healthcare, medical andsports uses. It is currently eyeing theChinamarketandpitcheditsproductatthe demo day hosted by Venture PortandNeoplyChinainShanghailastyear.

Source:TechNode

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IMPLICATIONSFORINTERNATIONALBEAUTYBRANDS

Innovation in product development, marketing strategies and in-storetechnologyhavehelpedthegrowthofKoreanbeautybrands,especiallyinemergingmarketssuchasChinaandASEANcountries.ThisisevidentwithKorea overtaking the US and Japan to become the second-largestcosmetics exporter to China after France. International beauty brandscould learn from the innovations of the Korean labels in order tostrengthentheirpositionintheirhomemarkets,aswellastoincreasetheircompetitivenessinemergingmarkets.

InternationalbeautybrandshaverespondedtoKoreanbeautyinnovationswithdifferentapproaches.L’OréalhaslaunchedproductsbasedonKoreanconcepts,suchasBBCreamsandcushionfoundation.LVMHhaspartneredwith AmorePacific to use the air cushion technology, and create newproductsforChristianDior.Ontheotherhand,EstéeLauderhasinvestedin Have & Be Co. Ltd, which owns the Dr. Jart+ and Do the Right Thingbrands.

In terms of marketing strategies, international beauty brands couldleveragetheKoreanWavetopenetratetheChinaandASEANmarkets.Forinstance, sales of the French beauty brand Yves Saint Laurent wereboostedafter itsproductplacement in theKoreandrama“MyLove fromthe star” in 2014, and its Rouge Pur #52 lipstick sold out worldwide,accordingtoareportbytheKoreaHerald.

InternationalbeautybrandscouldlearnfromtheinnovationsoftheKoreanlabelsinordertostrengthentheirpositionintheirhomemarkets,aswellastoincreasetheircompetitivenessinemergingmarkets.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEddieWongSeniorResearchAssociate

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