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I recently had the pleasure of visiting the top two leading beauty specialist retailers in South Korea, Aritaum and Innisfree Herb Station. The visits shed light on how leading K-beauty retailers are operating in a competitive environment. They are leveraging localized strategies including maintaining a wide network of stores and distributing product samples. Additionally, as the South Korean beauty specialist retail market reaches maturation, retailers in this space are actively strategizing to expand their customer base by appealing to more male shoppers as well as to customers worldwide.
Aritaum and Innisfree Herb Station are both beauty specialist retailer brands owned by AmorePacific Corp. Aritaum leads the South Korean beauty specialist retail space with 17% of the market, followed by Innisfree Herb Station with 16% market share in 2016. Both Aritaum and Innisfree stores exclusively distribute AmorePacific Corp’s brands. Aritaum offers AmorePacific’s brands such as Iope, Laneige, Marmode, and Aritaum, while Innisfree exclusively offers Innisfree branded products.
Beauty specialist retail stores are ubiquitous in South Korea (especially in larger cities), making them extremely accessible to shoppers. Between 2011 and 2016, Aritaum increased its store count from 1,104 to 1,345, and Innisfree more than doubled its store count from 408 to 1,100. (These figures do not include stores and booths that are very commonly located in grocery stores and subway stations.) In-store associates are trained to be very professional and knowledgeable about the products that these retailers are selling, and are willing to offer one-on-one consulting and distribute product samples before and after a purchase, both free of charge.
Image (left): Product samples distributed at Innisfree. These are samples of full-size products that are currently being sold at Innisfree. Oftentimes, particularly after the end of a transaction, Innisfree store associates will ask shoppers to choose the samples they would like to take with them.
South Korea’s beauty specialist retailing continues to grow, but will likely see market maturation over the forecast period. From 2011-2016, beauty specialist retailing in South Korea generated a sales CAGR of 7.7% while overall retailing only generated a CAGR of 3.6% over the same period. However, beauty specialist retailing in the country is projected slow down with only a CAGR of 2.3% over 2016-2021. In preparation for this imminent market maturation, K-beauty specialist retailers, such as Aritaum and Innisfree, are clearly making an effort to grow their customer base.
One group of shoppers they are seeking to attract is South Korean men. Relative to men in other countries, South Korean men are known to display more interest in traditionally female-oriented categories, such as cosmetics and fashion due to strong influence from pop culture. Men in South Korea are becoming even more appearance-conscious, and are willing to invest more time, effort and money in it. Beyond basic healthcare routines, more men are increasingly using skin and hair care products.
Both Aritaum and Innisfree are actively seeking to capitalize on this trend, as illustrated by their ads prominently featuring renowned male celebrities. The March/April issue of “Aritaum”, Aritaum’s bi-monthly magazine, also featured a section on men’s skincare trends. Furthermore, Aritaum and Innisfree stores maintain distinct sections for men’s products, and well-established product lines introduced specifically for men, such as Innisfree’s FOREST For Men skincare brand.
From left to right: 1) An ad outside of Aritaum features a male model, 2) Innisfree’s window ad features a male actor, 3) Innisfree’s FOREST For Men skincare All-In-One Essence.
K-beauty specialist retailers are also catering to inbound tourists and the wider international market. Products offered by K-beauty specialist retailers are commonly regarded as affordable, uniquely Korean gifts to take back home, and tourists often spend a large amount of their travel budgets on these products. Both Aritaum and Innisfree were catering to these tourists with signs outside of their stores in multiple languages and also by employing bilingual store associates.
From left to right: 1) A sign outside of Innisfree presents the top three items that are most popular with the retailer’s international shoppers 2) A sign outside of Aritaum presents benefits that international shoppers can receive, including a tax rebate, a welcome kit, and a special discount for purchases greater than KRW 100,000.
Furthermore, these retailers are making their products available to customers outside of South Korea. Aritaum has made its website accessible in Korean, English and Chinese, and ships its products to nearly 30 countries. The retailer also has locations in Canada, US, and China.
Innisfree has made its website accessible in Korean, English, Chinese, Russian, and Japanese, and maintains stores outside of South Korea. Since the opening of its first global store in Shanghai in 2012, the brand now has physical stores in Hong Kong, India, Malaysia, Singapore, Taiwan and Thailand. Both Aritaum and Innisfree also make a limited range of their products available on Amazon.com.