Chinese women increasingly in favour of South Korean cosmetics
They giggle and chat as they pick up the "Made in Korea" brands.
At the South Korean beauty store Innisfree in the We Life shopping mall in Beijing's Chaoyang district, a group of college girls with blushed cheeks and tinted pink lips try on different cosmetics in front of a mirror.
The group is a part of an increasing number of beauty-conscious Chinese women who are developing an appetite for South Korean cosmetics because of their innovative products, cute packaging and competitive price ranges.
"I like them because they are well priced, beautifully packaged and are of good quality," Peng Weizhu, a public relations officer in her early 20s and working in Beijing, said. "Besides, they are suitable for Asian people's skin, especially the colour and texture of their foundations."
Already, there are seven large South Korean cosmetics manufacturers doing business in China, with 25 of their beauty brands available in online and offline stores. This newfound interest for skincare is generating bumper earnings for South Korea's beauty industry.
Cosmetics producer LG Household & Healthcare, owner of the Face Shop brand, is anticipating strong growth here this year.
"Our company expects annual sales from China to increase by 50 per cent in 2015 from 121.1 billion South Korean won (S$148 million) last year," Park Hee-jung a press representative at LG H&H, said.
Other companies are just as bullish. Amore Pacific Group, South Korea's leading personal care firm, "expects China to contribute 28 per cent of the company's global sales by 2020 from the current 10 per cent", according to Ji Huilin, the company's public relations officer.
In the first quarter of this year, Amore Pacific generated revenues of 3.4 billion yuan (S$744 million) from China, Mintel Group Ltd, a market research firm in the United Kingdom, reported.
China has become the largest destination for South Korean cosmetics. South Korea exported US$370.8 million (S$513 million) worth of cosmetics in the first seven months of this year, an increase of 250.6 per cent compared to the same period in 2014, according to the Korean International Trade Association.
Arthur Chang, chairman of Chinese skincare e-commerce retailer and distributor U-Cosmetics, said that demand is so strong that his company sells one South Korean beauty product every 18 seconds. This rapid surge has encouraged South Korean companies to establish production bases in China to ensure supply and shorten delivery times.
"Korean cosmetic brands will increasingly localize along the value chain to further improve their positioning in China," Vera Li, a Shanghai-based analyst at market research firm Deloitte Touche Tohmatsu Ltd, said. "Many of the companies are already beginning to shift manufacturing to China to lower costs and enhance logistic efficiency."
To reflect this, Amore Pacific set up in Shanghai last year its largest overseas manufacturing base and logistics centre in China with a capacity to produce 100 million products every year.
Fueling this booming sector in the country is the new generation of trendy customers. South Korean manufacturers have been quick to target consumers in the 20s to 30s age group, especially college students.
This is a segment of the population that is extremely passionate about South Korean pop culture. These beauty brands have quickly expanded their presence here on the back of the Korean Wave, a cultural phenomenon related to the popularity of the country's soap operas, movies and K-pop.
The marketing strategy of these brands relies on celebrity endorsement and product placements in popular TV dramas, especially since young Chinese women are increasingly using South Korean stars as beauty role models.
"There was an enormous supply shortage of coral red colour lipsticks in China when the South Korean series My Love from the Star, starring Jun Ji-hyun, stirred up a craze for wearing coral red lipstick in the show," Li, of Deloitte, said.
South Korean cosmetics manufacturers are also heavily investing in sales channels to keep up with demand. The trend is now for these brands to set up their own speciality stores in shopping malls to attract consumers.
"The single-brand store format is meeting the demand of the new generation, who are looking for niche, professional, personalized products that fit their lifestyle," Chen Wenwen, senior beauty analyst at Mintel China, said.