In the e-commerce industry, the beauty market is an area that everyone covets. Cosmetics are more profitable than other products because of their higher price per customer. The buying cycle is fast, and it’s easier to deliver than fresh food. That’s why Musinsa, which sold clothes, Kurly, which specializes in fresh food, and Coupang, the absolute leader in e-commerce, rushed into the beauty market. However, no unrivaled leader has yet emerged. Although the number of players in the market has increased, the entire online beauty market has shrunk further. This is due to the unique features of the beauty market where you have to apply and buy it yourself.
Discount in the amount of cosmetics online transactions only
According to the National Statistical Office on the 2nd, the transaction amount of cosmetics online shopping last year was 10,397.4 billion won. There was a decrease of 14.6% since the previous year (12,173.4 billion won). The volume of online shopping transactions continues to grow explosively every year. It is even more so since non-face-to-face use has become a daily routine after Corona 19.
Last year, the total online shopping transaction was 206.4916 trillion won, up 10.4% from the previous year. Of the 22 detailed categories compiled by the Office for National Statistics, only five, such as books and furniture, saw a decrease in the number of transactions compared to the previous year. Among them, the number of online shopping for cosmetics decreased the most.
In the industry, the reason why the cosmetics market is going against the trend of activating non-face-to-face use is the essential characteristics of cosmetics, where experience is essential. A cosmetics industry official explained, “During the age of COVID-19 when color cosmetics such as lipsticks could not be tested directly even in department stores, the demand for cosmetics has inevitably increased online, but now many consumers are looking for offline stores again.”
One of the reasons why the online beauty market is not growing is that luxury cosmetics such as Chanel and Yves Saint Laurent, which are the core of the beauty market, show a passive attitude towards online distribution. “There is no need to sell products online that cannot be sold in department stores,” is the position of major luxury cosmetics companies.
Curly, who recently launched ‘Beauty Curly’ and ambitiously jumped into the beauty market, is having a hard time convincing luxury cosmetics companies. In preparation for Beauty Curly, Seulah Kim, CEO of Curly, visited executives of major luxury cosmetic companies and gave presentations, but she could not change their minds. The reason for the refusal was “We cannot give our product to companies that sell bean sprouts.”
Early morning delivery through direct buys, which is Curly’s advantage, didn’t help much in the beauty market. In particular, in the case of color cosmetics, if all the unpopular colors are bought in bulk, there is a risk of remaining malicious inventory, so passively buying and selling popular products became a weakness. Rumors circulated among consumers that “Curly doesn’t have the color they want, or it’s selling out fast.”
Curly responds by buying and introducing parallel products imported from luxury cosmetics brands such as Hermes and Giorgio Armani. However, among the top 10 makeup brands in department stores, only about 5 brands are sold at Curly.
Lotte On enjoys the halo effect of department stores
E-commerce based on department stores is in a relatively advantageous position thanks to these characteristics of the beauty market. Lotte Shopping’s e-commerce platform, Lotte On, is a representative example. Lotte On has not been able to show a significant presence in the e-commerce market as it has been pushed by the speed of Coupangen and lags behind the quality of fresh food in Curlien.
However, it overwhelms its competitors in the online beauty market. Lotte Department Store enjoyed the halo effect and officially joined major luxury cosmetics companies such as Chanel and Dior. There are around 120 cosmetic brands that operate official brand halls in ‘On and the Beauty’, Lotte On’s beauty specialty hall.
Choo Dae-sik, head of Lotte On’s Strategic Planning Division (executive director), said, “Luxury cosmetics companies consider it crucial that their brand value is not harmed even if they sell online. ” We are working hard to do that,” he said.
Lotte On also promotes marketing using offline stores at Lotte Department Store. A typical online/offline affiliate marketing is that you can receive a cosmetic sample by taking a coupon you received at Lotte On to a store at Lotte Department Store. In addition, department store VIPs are automatically given VIP benefits even if they do not shop at Lotte On.
Thanks to these efforts, sales of On and the Beauty from April to December last year increased by around 30% compared to the same period last year. As of last month, the number of members who joined the On and the Beauty Club was more than 200,000.
Kakao, another beauty powerhouse
Kakao is also a hidden powerhouse in the online beauty market. I benefited greatly from the ‘KakaoTalk gifts’ service. As the culture of exchanging ‘small luxury’ cosmetics such as lipstick and perfume under 100,000 won on birthdays has taken root among young consumers, luxury cosmetics companies have also begun to scramble to enter Kakao.
An official from the distribution industry said, “The e-commerce stores that big luxury cosmetics companies like Chanel have officially entered are usually Lotte On, SSG.com, and The Hyundai.com, along with gifts Kakao Talk.” He said.
Although Olive Young failed to attract luxury cosmetics brands, it is targeting the online market by using its own strengths. Olive Young’s long-term aim is to be the first to introduce ‘hip’ cosmetics brands that young consumers in their teens and 20s love.
An official from a department store said, “Olive Young distributes small and medium-sized foreign cosmetics brands, which have gone viral on social media as ‘must-buy cosmetics when traveling to Europe,’ in Korea faster than anyone another. ” They are dominating the online beauty market with a completely different strategy.”
There is ‘Today Dream’, which delivers products bought online within 3 hours from 1,200 stores nationwide, and the ‘Today Dream Pickup’ service, which allows customers to pick up products bought online and collected in store, in Olive Young’s efforts to target the non-face-to-face market, it is a tool
Jong-gwan Reporter Park pjk@hankyung.com
