Back in April, I wrote a post on the definition of K-Beauty. So many brands were jumping on the bandwagon calling their products "K-Beauty" and retailers were adding a lot of non-Korean brands into their K-Beauty section. Sephora was one of them and I called them out for having Japanese brands like boscia and Tatcha in their K-Beauty section. This post resonated with readers and a lot of people agreed with the dilution of what it meant to be K-Beauty.Read More
Last week news broke that Dutch conglomerate Unilever bought Carver Korea for $2.7B. Carver Korea is a Korean cosmetics company best known for the brand A.H.C. (Aesthetic Hydration Cosmetics). Most of us in the States won't recognize it because its biggest market is China with much less awareness and presence in the US.
Carver Korea was founded in 1999 as a cosmetics supplier to professional salons and they now sell over 1,000 different beauty products in Korea, China, and the US, with AHC as their flagship brand.
A little over a year ago, in July 2016, Goldman Sachs and Bain Capital announced they would buy a majority stake in Carver Korea for $500MM which accounted for about 60%. This would value Carver at around $833MM.
Fast forward one year later, and Goldman Sachs and Bain Capital sold Carver Korea to Unilever for 3x (3x!!!) the value. In one year!Read More
The title of this post is a question I've gotten a few times so here are a few reasons why I think Innisfree will do well in the US market.
They have a strong and cohesive brand story
Say what you will about whether or not Innisfree actually lives up to their brand story with their formulations, but their brand story is strong and cohesive. Touted as the first natural Korean beauty brand in Korea, Innisfree emphasizes ingredients of the earth, sourced from Jeju Island (described as the Hawaii of Korea) and their product lineup boasts things like Jeju volcanic clay, green tea, lava seawater and the like.
What I like about Innisfree is their brand and story is very clear. Many other K-Beauty brands churn out products quickly under various sub-lines with design all over the place, which ends up being very confusing for the consumer.
The ingredients-focused products should resonate well in the US market. I can't think of any other brand out there with such a strong earth ingredient story (maybe Farmacy?). If you know of one, please leave a comment below.
Innisfree is hitting upon a few trends
The earth/nature brand story should do well in this era where "eco", "organic", and "natural" are trending. Brands that are somewhat similar like Farmacy, with its farm-to-table positioning, or Skinfood, with its food and nutrients story, are doing well, which bodes will for Innisfree in the US.
Obviously, K-Beauty is the big trend these days and Amorepacific is clearly trying to capitalize on the momentum. Between K-Beauty and the natural/eco trend, I think Innisfree is very well positioned for success.
They have approachable price points
Compared to brands like Amorepacific or Sulwhasoo, Innisfree is the much more affordable brand with price points starting at $1.80 for a sheet mask, around $19 for a moisturizer, and $25 - $33 for a serum. This brand won't break the bank and the entry point for trying an Amorepacific brand has become much more attractive.
Innisfree has resources and investment behind it
As part of the Amorepacific portfolio, I am certain that Innisfree has a decent amount of resources and financial support behind its launch. They will be opening up a store in Union Square at 17th and Broadway. They're already hired a PR firm and will launch with guns blazing to ensure this brand is a success.
I'm curious to see how the brand approaches the Jeju Island story, as I know this will require a lot of education. Most Americans don't really know where South Korea is nor the difference between North and South Korea let alone where or what Jeju Island is. Jeju Island is such a strong part of their brand story in Korea, it'll be interesting to see if it translates well in the US.
I'm also curious to see what Innisfree will do about distribution. Will they go about only opening and selling through their stores or will they get the brand into Target or a similar retailer? Given the approach with their other brands, I'm assuming they will be launching in a major retailer but I'll be waiting to see what their strategy here is.
What do you think? Do you think Innisfree will succeed in the US? Write a comment below.
To be honest, it's been a slow news cycle in the K-Beauty world. Perhaps it's because it's summer but there hasn't been much new news these days. So, I thought I would write a kind of state of the union in K-Beauty as I see it in the US.
B2C is about the 3 Horseman
The past few years have been witness to a deluge of new direct-to-consumer e-Commerce sites offering Korean beauty products but it's really all about the 3 Horseman.
Soko Glam, Peach & Lily, and Glow Recipe are really the three to watch and the ones that have made the most meaningful inroads in the US market.
Many of the smaller players like Via Seoul, Skin Milk Bar, Petaluma & Co (examples only), are starting to realize that can't make it work. Many of these players that came later in the game are now closing shop because they can't get scale, can't make money, and can't compete with the 3 Horseman for customers at this point.
Memebox - Are They Still K-Beauty Players?
Have you visited Memebox recently? Have you noticed that they added a slew of Western brands to their site? In the recent weeks they added brands like Glossier, Anastasia Beverly Hills, Marc Jacobs Beauty, Neutrogena, Bare Minerals and more.
I'd say the majority of their brands are still Korean (maybe a 70/30 split or 60/40 split) but they've quietly added the brands mentioned above and then some. They still link out to Amazon and Ulta. They've added Sephora and Walmart and sometimes link to the brand's site (like Glossier). No change to their affiliate commission business model and it looks like they're well on their way to trying to create that data layer and be like a Google or Tripadvisor of beauty.
Jury's still out on whether they can monetize this into something successful. They may be focused on building out their private label brands as the main revenue driver. Now that they are not bleeding cash each month from operating an e-Commerce business, they have some time to build out this new data platform concept.
However, perhaps we should stop talking about them in the same breath as K-Beauty or Korean anything. Judging by the direction of their site, they are clearly trying to build a beauty platform and are quickly expanding beyond just K-Beauty.
W2Beauty - Maybe They Should Merge with Memebox
Racked had an article profiling W2Beauty a bit more in depth. As an e-commerce + editorial + community site, they're slightly different from others because of their global customer base and community focus. However, with all their e-Commerce products shipping from Korea, I'm not sure they can be successful against local retailers and Amazon unless they offer really unique products or cheap prices that customers in the US are willing to wait for.
Rather, they may be better off selling ads on their site once their community gets to a meaningful number. And, maybe they should merge with Memebox since they seem to have some complementary capabilities. Memebox may need/want a community focus to make their platform stronger. They may also want to get back into e-Commerce once they figure out that affiliate commission will not add to much. But, perhaps Memebox will want to build those capabilities themselves, which they certainly could.
US Retailers & Non Korean Brands Are Still K-Beauty Hungry
Yes, retailers are still on the K-Beauty bandwagon. And so are non-Korean brands that want to be classified as K-Beauty even if they're not. For example, I heard that Shiseido doubled their sales of certain skus once these items were categorized as K-Beauty even though Shiseido is a JAPANESE brand. As long as their sales increase and awareness of their brand grows, it seems that these non-Korean brands don't mind being classified as K-Beauty. Money talks.
China is Still An Issue and I Don't See it Improving the Situation in the US
I had written before that the geopolitical situation between the US, China and South Korea was tense and led to China economically punishing Korea by banning tourism to Korea amongst other tactics. Due to the reduction in tourism and a lingering anti-Korea sentiment in China K-Beauty sales to Chinese customers fell off a cliff and still have not yet recovered.
One theory was that this would force Korean brands to invest more in the US to help diversify their business but...I just don't see this happening right now. Brands are still scrambling to fill the sales gap that China is causing and they are too stressed and busy to focus on the US.
When Will the Bubble Burst?
I've said before that this bubble will deflate. Again, it may not be because of lack of demand but, rather, due to structural issues given the fact that many of these brands lack the proper resources and infrastructure to do anything meaningful in the US.
Things to watch for this fall
Innisfree launch in the US - will they succeed? I get this question a lot.
Althea & B2Link expansion in the US - will this happen and can they be successful?
Chinese sales of K-Beauty goods - will we see recovery and therefore some stabilization in the market?
If you have any ideas for topics, write a comment below and I'll try to address it or investigate it.
Back in April, when CVS announced that it would be launching an assortment of Korean beauty brands in 2,000 of its stores and online, a bunch of stories came out proclaiming that yes, finally! K-beauty is not just a fad and it is definitely here to stay.
I often get asked if I think K-Beauty is a fad. My answer is yes. However, I do think that K-Beauty will live on.
Let me explain.
us consumers will move on
The mass hysteria levels of K-Beauty in the press and media will most definitely die down. American consumers are fickle and have short attention spans. They will move on to the big next thing, whatever that may be. (Maybe Scandinavian skincare? Taiwanese skincare? Anyone have guesses?)
Brands like Dr. Jart and Laneige may be about as mainstream as Korean beauty brands get as standalone brands. (Also, side note: it's interesting that these two brands are not primarily positioning themselves as K-Beauty; that's more of a secondary message.)
k-beauty is getting copied
However, the impact of K-Beauty on the beauty industry is growing. I've written other articles about how Western brands are cashing in on this K-Beauty bandwagon and essentially lifting Korean beauty concepts for their own products. Garnier did it with their Moisture Bomb, a straight up knock off of belif's Moisturizing Bomb (LG H&H, why didn't you trademark this??). Benefit launched their own version of Laneige's Two Tone Lipstick. Recently, Vogue wrote about how the concept of "jelly" texture skincare has rippled through the skincare category. Glossier, Estee Lauder, Dior, etc., have all launched jelly products within the last year or two in response to the way that K-Beauty has popularized unique textures and fun names to go along with them.
The Sephora VP/DMM of Hair & Skincare Priya Venkatesh admitted at a CEW event that the popular Peter Thomas Roth product Water Drench Hyaluaronic Cloud Cream, which is selling very briskly, was inspired by Korean beauty. Emotive words like "water drench" and "cloud cream" are things that Korean beauty brands really excel at when making new skincare products to help products stand out in a competitive market.
Not to mention that Western brands also bring over entire Korean beauty product categories and popularizing them in the US like the BB cream, cushion compact, and sheet masks.
korean brands may never get big
No one can doubt the impact of K-Beauty on Western brands. Unfortunately, for many of these Korean beauty brands, their ability to stand on their own two feet as independent brands is a much harder road.
In this K-Beauty category, I'm going to guess that brand re-call and loyal consumer relationships are lacking. Once brands are lumped into the K-Beauty category (currently, easier to do given the hot trend) they get easily lost in the shuffle amongst the hundreds of other brands also classified as K-Beauty.
I know a brand that is in Ulta under the K-Beauty section that is trying to get out of this section because they know that to be able to survive as a standalone brand long term they have to be much more than just another Korean beauty brand.
is imitation really a form of flattery?
The K-Beauty media hysteria will die down at some point and brands will find the Korean beauty classification limiting in the long term. But the impact of Korean beauty innovation will remain. Ultimately the majority of Korean brands will never really get huge but it would be great to see more brands make a legitimate attempt (and subsequent investment) to carve out a piece of the pie.
If your brand can't cut it as a standalone brand but your ideas are imitated, would that still be considered success? Do you think K-Beauty is a fad? Write a note in the comments, would love to hear.
CVS announced they were going to carry K-Beauty in roughly 2,500 stores and many people cheered the news. Consumers cheered because now Korean beauty was going to be more easily accessible at affordable prices. Brands cheered because this meant increased and ongoing retailer acceptance of K-Beauty in the US mass market.
What could go wrong?
If you dig a bit deeper beyond the feel good press stories about the products that will now be available at CVS, you'll see that it could actually be bad for some brands.Read More
Now that Memebox's new site launched May 1 and their affiliate content site is up and running, they have now focused their attention to pushing two of their five private label brands.
WWD announced that Memebox launched Nooni and I Dew Care (rebrand of Bonvivant) into Ulta both online (started June 26) and offline (starting July 10).
How have they been selling? It's hard to say since the online launch just went live but Memebox CEO Dino Ha did point out on his Instagram that the Disco Kitty product sold out in five days.Read More
As a follow up to my previous post titled How Geopolitics Impacts Your K-Beauty Sheet Mask, I've teamed up with Sandalwood Advisors, a data platform that focuses on Chinese consumer transactions, to analyze the impact that the row over THAAD had on Korean cosmetic purchases in China.
summarizing what happened
At the time of my previous article dated March 30, South Korea was still in political limbo. Former President Park Geun Hye had just been impeached and the country was without a clear political leader. Tensions between Korea and China were at an all time high over THAAD, the missile defense system that Korea put into place with the help of the US. China was punishing Korea over this through economic bullying and all eyes were on the new presidential election to be held May 9, 2017 to see who would lead the country out of the mess it was in.Read More