I know we all say it but, wow, 2017 really did fly by and it's been quite a busy year for K-Beauty and Inside the Raum.
First, I want to thank all my readers for following along and sending comments, notes, messages, etc. When I started this website, I wanted to provide an alternative and more objective view of the K-Beauty industry in the US, something different from all the consumer oriented PR. It's been great to meet my readers at conferences and events, and I'm excited to see what 2018 will have in store. If there are other types of content or topics, you'd be interested in reading about, don't hesitate to let me know in the comments section as I continue to build out this site and my business.
Now that we're about two weeks away from 2018, I wanted to write a post on some predictions for K-Beauty next year.
First, Let's Recap 2017.
2017 in the world of K-Beauty in the US was one of continued growth. This was the year in which retailer adoption of Korean beauty products continued to expand. Now, everyone from Bergdorf Goodman to Anthropologie to J.Crew/Madewell to CVS has Korean beauty products.
It was also the year that the e-tailer/distributors like Glow Recipe and Peach & Lily came out with their own private label products. Glow Recipe sold in Sephora while Peach & Lily offered their sheet masks in CVS and other department stores like Barneys, Bergdorf, etc.
Let's not forget the geopolitical turmoil amongst China, South Korea, and North Korea, which caused an effective boycott of K-Beauty goods by the Chinese and turned Korean brands' attention the US and other markets.
There was also a big acquisition, notably Carver Korea by Unilever for $3B which had many industry folks raising their eyebrows and shrugging at why and how Carver got sold and flipped so quickly.
Amorepacific got a new President in Jessica Hanson. They also launched Innisfree in New York City.
There were pop ups galore with Soko Glam in Bloomingdales, Glow Recipe in Saks and Henri Bendels, Peach & Lily in Bergdorf, etc, etc.
All in all, another banner year for K-Beauty in the US.
Now, what will 2018 bring? Here are four predictions:
K-Beauty In Popular Retail Stores Will Contract
The good news: K-Beauty is just about EVERYWHERE. Retailers were hot on this trend in 2016 and 2017 and just about ever retailer and their mother has a K-Beauty section or some kind of K-Beauty assortment offering consumers much more access to these brands and products.
The bad news: K-Beauty is just about EVERYWHERE. This means the market is saturated with Korean beauty brands in every retail outlet and without much marketing support for the products and brands in these retail channels and little reason to buy Tony Moly in Ulta versus Macy's, sales are not meeting expectation.
I'm already seeing sales declines in various retail channels and am hearing from others that their K-Beauty brands are not performing to expectation.
“I have seen a decline with a lot of my KBeauty brands.” - from a retailer. Wonder if others are seeing the same trend.— Ju Rhyu (@jurhyu) November 30, 2017
Expect to see sku rationalization (ie, skus will be cut) in 2018. Many of these retailers acted quickly because they knew K-Beauty was a trend and brought on a bunch of brands and products. However, as I have stated before, distribution does not equal sell through and without much differentiation or a a presence beyond the K-Beauty halo, these products and brands cannot stand on their own two feet.
We will see a marked decline in K-Beauty brands in retail as retailers cut the poor performing ones and optimize their portfolios for the best-performing ones. Also, attention K-Beauty brands: this means it will be harder to get into retail in 2018.
Niche e-Commerce Sites Will Continue To Grow
I expect niche sites like Soko Glam, Glow Recipe, and Peach & Lily to see continued growth in their .com sites. If the first prediction above holds true, they will see a marked decline in their B2B businesses as retailers trim their Korean products. Instead, they may see more growth in the e-commerce sites and should invest in them, as they have the formula to make them successful: education + influencer status + ability to market.
One of the reasons K-Beauty is having a hard time in retail stores is because they require a lot of education and stores like Ulta do not do enough of it. The three K-Beauty horseman, however, educate, promote, and market the skus they curate and, therefore, should focus more on their e-commerce operations where they will see more success.
Someone Will Get Acquired
There are already rumblings and discussions of acquisitions of some of the e-tailer/distributors out there. I think we may see an acquisition of one of them (Memebox? Glow Recipe? Soko Glam?). Given that we may be seeing a plateauing of K-Beauty in the US, it would be smart of some of them to cash out while they can.
More Brands Will Try To Go At It Alone
We will see more and more K-Beauty brands try to tackle the US market sans distributor in 2018. If retailers get pickier about K-Beauty brands and products and e-tailers/distributors have less ability to place Korean beauty brands into retail, there is less reason for these brands to work with them. I think more of these brands will try to go at it alone in the US and many will shun the K-Beauty label for one that has more longevity and isn't as trendy.
As Cheryl Wischhover astutely wrote in her Racked article, "Korean beauty, the concept, has essentially become the brand." When you're categorized as such, it makes it really hard for your brand to stand out. I think a lot of Korean brands are realizing this and will try different strategies in 2018.
As always, feel free to add anything I may have missed in the comments section.
Happy holidays and Happy New Year to all!