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| Chinese customers enter a cosmetics section of a duty free store in downtown Seoul. As demand for Korean cosmetics continues to spike, many non-cosmetics companies are diversifying their business portfolios into the sector. / Korea Times file |
By Park Si-soo
The rapid growth of the domestic cosmetics industry has galvanized many non-cosmetics firms to join the business.
Several big hospitals and pharmaceutical and health care companies have recently launched their own beauty and skincare product brands to cash in on the boom. Unexpected newcomers include Malpyo, a blacking maker; Haengnam, a bone china company; and Korea's top three entertainment agencies ― SM, YG and JYP. Some universities are considering launching namesake beauty and skincare products targeting foreign campus visitors in collaboration with major cosmetics companies.
Newcomers currently focus on the local market, but don't rule out the possibility of expanding into China and other Asian countries where Korean cosmetics products are in vogue.
Experts said this will help speed up Korean cosmetics' international expansion. Yet they also worry that many of newcomers will collapse like a house of cards in the near future, given they entered the market without sufficient preparation and study about the unique value chain of the cosmetics business.
In addition, they were said to have started the business without a commitment to build own facilities for production or research and development, indicating their primarily goal for entry was maximizing short-terms gains, not fostering cosmetics as a new growth engine in the long run.
"This is a typical phenomenon that can be seen in booming industries," said Shin Hong-sung, a cosmetics marketing expert. "They hurriedly jump into the business as sales of domestic cosmetics firms grow rapidly."
He said they were benefitting to some degree from the ongoing boom, but might soon lose luster due to weak fundamentals.
Samik, a well-known musical instrument maker, is poised to make its way into the cosmetics business. Last month, the Seoul-based company said it would take over a French cosmetics brand and sell its products in Korea and China. Negotiations for the acquisition were underway, the company said, but refused to give detailed information due to the sensitivity of the issue.
Earlier, Samik was selected as one of the operators of Incheon International Airport's duty free section, with the license set to expire in August 2020.
Experts said if Samik is successful in the acquisition, products from the unidentified French company will be sold at its duty free shop.
In June, Malpyo launched cosmetics for men in their 20s and 30s. Officials said the company is committed to improving the quality of products to diversify its business portfolio and nurture cosmetics as its next "it" item.
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