Sephora Korea Records Deficit in Two-Row Years
- Chaileedo Press
- May 6, 2022
- 3 min read
Sephora Korea recorded a deficit for two consecutive years. It is recorded that its sales dropped 12.7% compared to the same period of last year. However, despite the impact of a tightening of health restrictions in China in March, Sephora still performed well in China market in recent years.
Sephora Korea is said to have reported a loss for the second year in a row, according to Korea Joongang Daily, leading the news outlet to speculate that the LVMH-owned retailer may be preparing to admit defeat and close part of stores in the Asian market.
Sephora Korea saw sales drop 12.7 percent to $9.7 million in 2021, as compared to 2020 figures, Korea Joonang Daily reports, quoting figures from the Financial Supervisory Service, and posted an operating loss of $11.2 million.
The Beauty retailer is said to be struggling to keep up with the fast-paced K-beauty industry; add to that repeated restrictions due to the pandemic and dwindling tourist numbers, and it’s not surprising that its stores, which opened in 2019, have failed to get the tills ringing. Sephora Korea closed its Myeong-dong branch in January.
Founded in 1970 by the Louis Vuitton Moet Hennessy Group (LVMH), the company operates over 2,700 stores in 35 countries and is tied for the highest market share along with Ulta Beauty.
In October 2019, Sephora Korea opened its first store at the Parnas Mall in Gangnam District, southern Seoul, and later opened five additional stores including one in the tourism hot spot of Myeong-dong in central Seoul.
However, the Myeong-dong branch ended up closing this January as the number of tourists had significantly dropped due to the pandemic.
Sephora Korea had initially announced plans to open 14 new stores including an online shop by the end of this year, but this now seems very unlikely.
Experts also say Sephora needs to have a better understanding of the Korean cosmetics market.
“The Korean cosmetics market is referred to as an innovative market globally,” said Jin Jeong-im, a beauty consultant. “Sephora failed in meeting Korean consumers’ expectations in terms of differentiating its products and operating both online and offline shops.”
However, according to the financial report of Q1 in 2022 released by LVMH, its segment Selective Retailing, where Sephora is located, achieved organic revenue growth of 24% in the first quarter of 2022 compared to the same period of 2021. Sephora achieved excellent performance in the quarter with a strong rebound in the activity in its store network, which had been partly closed at the beginning of 2021. Momentum was particularly strong in North America, France and the Middle East, driven notably by perfume. Despite the impact of a tightening of health restrictions in China in March, Asia continued to grow over the quarter.
In 2021, Sephora continued to innovate and invest in the Chinese market. In October, after China's new regulations on cosmetics animal testing, Sephora was the first to introduce five overseas high-end brands without animal testing to synchronize the latest global beauty trends and exclusive products with Chinese consumers.
Ms. Alia Gogi, President of Sephora Asia, said that China is the largest market in Asia and we are always looking forward to providing Chinese consumers with more unique products, trends and delightful shopping experiences.
To provide consumers with more of these amazing shopping experiences, Sephora has brought cutting-edge retail innovations to China, represented by the opening of Sephora's offline flagship store in TAI KOO LI in Beijing in May 2021. It is worth noting that the store is the first 24-hour digital flagship store.
Recognizing the long-term impact of digital transformation on the industry's value chain, Sephora will also launch "stores of the future" to bring innovative retail experiences to consumers. The initiative will begin with one pilot store in Shanghai and one in Singapore, where consumers will see upgraded digital devices including Virtual Artist and Fragrance Studio, as well as VR experiences and enjoy better and more professional beauty consulting services. Customers can have an immersive consumer journey in newly designed stores.
While expecting more new products and experiences, Chinese consumers are also becoming more socially responsible and want to minimize the environmental damage caused by their consumption behavior, and the environmental friendliness of beauty brands and products has become an important consideration when they consume. In response, Ms. Alia Gogi said Sephora has always been committed to bringing more sustainable brands to consumers, and this is true in China as well.
At this year's 4th China Expo, Sephora presented its exclusive Sino-French luxury skincare brand CHA LING to the Chinese market and announced the launch of the brand's new "Name a Tree" tea tree naming project under the "Tea Spirit - Conservation Tea Forest Project", inviting consumers to participate in the brand's sustainable initiatives.
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