Most consumers won't really know or care about the behind-the-scenes machinations of how they get their Korean beauty items but it's become quite a brutal, competitive scene.
I used to say half jokingly that it's like a drug war with different cartels ("K-Beauty cartels") fighting for brands and territory in order to claim their space. The scene has changed over the years as the space has matured and grown. Even as someone who works in the industry, I still get confused about who sells what and who has the right to distribute which brand and how brands end up in channels like Costco. Here's my attempt synthesize:
Five years ago, you had to get an exclusive
When the US K-Beauty scene was just ramping up, it was all about the exclusive distributor deal. Many distributors negotiated exclusive contracts to be the sole agent for a brand and their products with the rights to distribute them and sell them.
These distributor/D2C (direct to consumer) businesses had leverage and influence to win these agreements. This is why you rarely saw brand overlap amongst the three. If one distributor had the rights to X brand, that would mean that another distributor would have to buy from them and as competitors, they would never do that.
Initially, these distributors had success getting brands into coveted channels like Sephora or Ulta or Nordstrom, etc. However, as I wrote before, just because you get in the doors of a Sephora, does not mean you are selling to the end consumer. You need to market and promote your brand in order for consumers to know about it.
Now, it's about sales and profit
I think many brands are realizing the difficulty of actually building a sustainable business in the US. They may have signed exclusive agreements with the thoughts and hopes that it would mean multi-millions in sales right off the bat. And if they get into Sephora? Hold the door. They will make it big in no time.
Unfortunately, as brands have flooded in, it has been extremely difficult for Korean brands to really stand out. K-Beauty is the brand with little brand loyalty to individual brands. As I wrote before, this will be the year of sku rationalization and poor performing brands being shown the exit. Now, brands are re-thinking their approach and seeking different paths.
Brands use more than one agent or distributor
If five years ago it was all about the exclusive, now you will see the brand no longer willing to sign them and instead using multiple partners to sell their products in the US.
Last year when I was at Cosmprof Las Vegas, a retailer/distributor (not Glow Recipe) was representing Whamisa which I thought was a Glow Recipe exclusive brand. When I reached out to them about their distributor status, they said they had distributor rights in California. So it seemed like Whamisa had carved out territory by state.
Sometimes brands carve out territory by channel. They will give one partner rights to online distribution and another offline store distribution. This is why you may see very disjointed pricing and promotional offers.
May Coop as a case study
May Coop is a perfect example of how changing distributors can change the channel and how it ends up on a consumer's vanity.
May Coop was first sold on Peach & Lily and then made its way to Sephora. For one reason or another, it stopped selling at Sephora and at some point (I'm not exactly sure when) changed their distributor relationships and now they are sold at Costco.
Going from Sephora to Costco is a pretty drastic change and very different direction for a higher end beauty brand. Brands switch from distributor to distributor in the background and it affects how it gets to the consumer. Unfortunately, I think this is one of the biggest downfalls of K-Beauty in the US. The lack of control leads to brand dilution, pricing disparity, and a lack of overall strategy.
We'll see where things go from here.