Why has Korean Cosmetics repeatedly Failed in China?
- Chaileedo Press
- Sep 26, 2022
- 5 min read
Updated: Sep 27, 2022
Another Korean makeup brand has been hit hard.
Recently, according to a CCTV-2 report, Venus One, the largest shareholder of ABLE C&C Co., will list its shares for sale. ABLE C&C Co. is the parent company of Korean makeup brand MISSHA. According to the report, ABLE C&C Co. will lose up to 110 million yuan(about $15.4 million) in 2021 due to multiple factors such as the COVID-19. At the same time, the number of MISSHA offline stores is now less than half of the peak 700.
CHAILEEDO noticed that not only MISSHA was reported the weak performance. Innisfree, ETUDE HOUSE and other Korean makeup brands are also not optimistic as they repeatedly rumored the news of pulling out of China or closing offline stores. All signs show that the era of the mass Korean makeup brands are gradually fall with the fading of the Korean wave.
Only 121 offline stores left in China
“It has ebb and flow”. This saying fits in the Korean makeup brands. As far as we know, MISSHA, established in 2000, is one of the first Korean brands to create a single brand of street-side cosmetics stores. It wins the love of Korean consumers with its cost-effective low-end line. MISSHA sales exceeded 505 million yuan in just its two-year launch. It sets up the era of single-brand stores.
The brands such as The Face Shop or SKINFOOD, which were popular in China were founded after MISSHA’s success. In 2006, taking advantage of the Korean Trend, MISSHA’ officially entered the Chinese market. In addition to opening single-brand stores, it also expanded into stores in department, CS stores and Watson's channels. At that time, the product line of MISSHA covered skincare, color cosmetics, beauty tools and other categories. Among them, the products launched by MISSHA such as MISSHA Perfect Cover BB Cream and Air Cushion were all well-known for a while. MISSHA Perfect Cover BB Cream was the market initiator of BB Cream category.
Some media reports said that in 2014, MISSHA completed the laying of 947 stores in the Chinese market in the mode of direct operation and regional agents. Among them, there are 25 department stores and single-brand stores in directly managed areas in Beijing and Tianjin and 250 department store counters, 200 brand stores and nearly 500 CS stores operated by distributors around the world. MISSHA has also entered online platforms such as Tmall, Jumei, JD and others.
At its peak, ABLE C&C, the parent company of Mystique, ranked 3rd in the Korean cosmetics industry in terms of volume. It just followed behind Amore Pacific and LG. However, after the outbreak of the THAAD in 2016, the Korean Trend gradually ebbed in China and the company was also affected. In 2017, the parent company of MISSHA was acquired by Korean private fund Venus One, which is the largest shareholder of ABLE C&C. After that, its performance has declined severely due to multiple factors as well as the impact of the epidemic, .
According to CCTV-2 reports, the operating loss of ABLE C&C, the parent company of MISSHA, was up to 110 million yuan(about $15.4 million) in 2021. In the Chinese market, the situation of MISSHA is also much worse than before. According to the financial report, ABLE C&C’s China branch sales were 107 million yuan(about $15 million), 63 million yuan(about $8.8 million) and 44 million yuan(about $6.15 million) in 2020, 2021 and the first half of 2022, respectively. It is shown a clear downward trend. As of now, the number of offline stores announced on the official website of MISSHA China is also only 121, which has long since lost its former style.
Mass Korean cosmetics are collectively defeated
In fact, the defeat of MISSHA in the Chinese market is only a microcosm of the weakening of mass Korean cosmetics. Among them, the 2016 THAAD affects not only MISSHA, but also the inflection point of the whole mass Korean cosmetics in the Chinese market.
After this, the market share of Korean cosmetics in China has been decreasing year by year. According to public data, in the first five years of 2017, the annual average export rate of Korean beauty products in China exceeded 60%. In 2014, China became the largest cosmetic exporter of Korea. While in 2018, the export of Korean cosmetics to China fell to 20%, and by 2019, only 14%.
It is worth mentioning that the performance of the two major Korean beauty groups also began to show weakness from 2017. According to Amore Pacific's financial report data, its cosmetics business saw its first negative growth in 2017, down 10%, and slumped 21.50% in 2020. It did not increase by more than 4% in both 2018 and 2019. The LG cosmetics business also did not increase by more than 2016 in both 2017-2020. So far in the first half of this year, both Amore Pacific and LG have seen their sales decline by more than 10% (Read more: Top 10 Global Beauty Brands in The First Half of 2022 ).
In contrast, mass Korean cosmetics that were once popular, such as Face Shop, Innisfree and ETUDE HOUSE, struggle to regain their momentum. Specifically in terms of brands, at the end of August 2018, The Face Shop completely shut down its single-brand stores in China. In 2019, Amore Pacific's brand Innisfree closed 40 stores in bulk, 90 more in 2020, and announced in December 2021 that it would be scaled down to 140. In March 2021, ETUDE HOUSE announced the closure of all offline flagship stores in mainland China.
So, why did the golden age of Korean makeup not continue?
As we all know, the popularity of Korean makeup in China cannot be separated from the Korean culture as the pioneer. However, the THAAD has led to the ebb of Korean culture in China, which also makes the driving effect of Korean culture on Korean makeup brands significantly reduced. In addition, Korean cosmetics in China are also popular for reasons including high value, high cost performance, fast product updates, hot-selling products, etc.. However, as an import brand agent said, as international brands and local Chinese brands began to do pop-ups, the freshness and core competitiveness of Korean makeup brands became missing. Consumer demand for Korean makeup began to reduce a lot.
Moreover, the rise of Chinese local brands in recent years has also seized the lost share of Korean Cosmetics. At the recently held 5th CHAILEEDO Conference on China’s Cosmetics Trends, Xie Yong, chairman of Beijing Dr. Plant Biotechnology Co., Ltd. said, "Innisfree was once particularly brilliant. But the THAAD had a huge effect on them. While Japanese and Korean cosmetics fell off, Chinese cosmetics companies caught up at the right time. Because the two have similar targeted audience and share the same philosophy of oriental skincare concept."
Some think that there is no need to be overly optimistic about the development trend of Korean cosmetics. Some think that Korean makeup has its own development trend. A practitioner with more than 20 years of experience in Korean Cosmetics business, said that because of the epidemic, e-commerce development and other factors, the layoff of offline stores is normal. "Because of the impact of the Chinese epidemic and political factors, some Korean cosmetic brands have shifted to Southeast Asia, Russia, North America and other markets. Many Korean makeup performed very well in Russia this year." He revealed.
To sum up, under the double attack from the United States big brands and Chinese local brands, Korean cosmetics is difficult to return to the peak. What's more, the future of China's cosmetics market will only become more competitive. The new generation of consumers will only become more discerning. If the Korean cosmetics can't make a breakthrough, it will only be more and more difficult in China.
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