Blue Ocean Strategy
How Royal Imex Chairman Jhung Jin-chul conquers wig market
This is the sixth in a series of articles highlighting successful Korean entrepreneurs overseas. The series is sponsored by eBay Korea, JTI Korea, Korea Post and World OKTA. — ED.
By Kim Tae-gyu
Two kinds of businesspeople exist: those who target today’s clients through meeting their outstanding needs, and those who turn to future customers by discovering untapped markets.
While most companies adopt the former approach, aka the Red Ocean Strategy, only a few employ the latter, aka the Blue Ocean Strategy, which requires the ability to recognize trends and anticipate the future.
Royal Imex chairman Jhung Jin-chul is a rare example of a Korean entrepreneur who has employed the Blue Ocean strategy and through it has achieved significant success in a major market, the United States, over the past few decades.
Jhung stood out by preparing for the future in the wig industry at a time when the industrial paradigm was set to change.
“When I entered the U.S. wig industry in the early 1980s, the mainstream items were ones made of synthetic materials. But I predicted that wigs made of real human hair would be a fad,” Jhung recollected in a recent interview with Business Focus.
“My prediction proved to be true, and I enjoyed the first-comer advantage over the years, which enabled Royal Imex to take firm root in the U.S. Thereafter, the firm has fared well.”
Human hair wigs are better than synthetic ones because they are by far more natural- looking. Further, they can be cut, styled and colored to suit personal tastes. They also respond to permanent waves, which is impossible with synthetic wigs.
In line with the Blue Ocean Strategy, the reward of having won the uncontested market space was great ― the company sold the wigs at around $30 to $35, more than half of which was profit.
“Beginning in 1986, people started showing their affection to human hair wigs, and the hip went into full swing the next year, which was a great boon to Royal Imex, the pioneer of the products,” Jhung said.
“By contrast, others suffered reduced profits as the market share for synthetic wigs continued to get crowded out. The cutthroat competition chipped away at the bottom lines of most players.”
Thinking outside the box
Despite the increasing popularity of human hair wigs, other companies did not immediately enter the market.
“A vast majority of wig wholesalers and retailers thought that the popularity of human hair wigs would be temporary because human hair is hard to procure,” Jhung said. “They thought that people would eventually return to synthetic items because the supply of human hair was insufficient to meet the demand, in their opinion.”
Indeed, it was very tough to buy large quantities of human hair back then. But Jhung had a different idea ― he was sure about the bright prospects of human hair wigs despite the small amount of hair available.
“China has some 1.4 billion people and a half of them are women who can provide hair. I believed that they would provide it over the long haul,” he said.
Another secret of Jhung’s rise came from nowhere: he monopolized the import of human hair wigs from one of very few suppliers, or his motherland, Korea.
His expectation was correct, and the market for human hair wigs continued to expand, thanks to the increased supply of materials, thus greatly benefiting Jhung and Royal Imex.
In a few years, a flurry of synthetic wig manufacturers and vendors realized the change in the industrial paradigm and ventured into human hair wigs. However, they were too late, as Royal Imex had firmly established itself as the industry leader, with the lion’s share of the market.
Its success continued into the new millennium with more than $100 million in annual sales despite the aftermath of the global financial crisis in the late 2000s.
His success story was, however, not without great difficulties. While pursuing the Blue Ocean Strategy for the next half decade beginning in 1979, Jhung saw losses reaching $200,000.
In 1985, a creditor reviewed the financial status of Royal Imex and concluded that the U.S. wig importer had to shut down unless it could attract $200,000 in investments to pay for its debt.
At this point, Jhung was desperate, as he couldn’t borrow from banks any more. If his company was liquidated, he and his family would become homeless.
“I initiated the business based on a mortgage loan of $50,000. But the accumulated deficits were up to four times that. Hence, I ran the risk of losing everything,” he said.
Knowing he could not afford the luxury of self-pity, he knocked on the doors of his friends and acquaintances to borrow about $50,000 to keep running the business. These friends saved the day.
As the human hair wigs became popular in the market, everything returned to normal, and the company became solvent again.
“If I had given up in 1985 and had not bounced back from the early failures, Royal Imex would not exist now,” he said.
Jhung hasn’t always been in the wig trade. He studied English literature at Korea University, and at that time he wanted to become a banker, the most popular occupation in Korea in the late 1960s, thanks to high salaries.
Yet, he entered the wig industry because of his elder brother who ran a wig company in Korea. So, after he crossed the Pacific in the late 1970s to live in California, he decided to work on the area he was best acquainted with ― wigs. He believed in the saying, “a Jack of all trades is a master of none.”
Later, after hitting the jackpot with human hair wigs and earning big money, he decided to do something for his compatriots.
First, beginning 1999, he worked for many years for the Center Bank in Los Angeles, which was established for Korean residents in the U.S. On March 18, 2011, Jhung rang the opening bell of the NASDAQ to commemorate the 25th anniversary of the NASDAQ-listed lender.
In 2000, he also took the chairmanship of the World Federation of Overseas Korean Traders Association (World OKTA), an organization of successful ethnic Korean entrepreneurs across the world.