in-cosmetics Korea spoke with Son Seong-min, the lead researcher at REACH24H KOREA about the impact of COVID-19 on the cosmetic industry. On the very first day of in-cosmetics Korea 2020 on 17 June, Son Seong-min will be presenting a talk about the topic at the K-Beauty Zone.
With the WHO stating that COVID-19 is a pandemic and as the virus is spreading rapidly not only in Asia but also in Europe, various industry sectors have been hit hard – how about the cosmetic industry?
As you can easily guess, the situation is not good at the moment. Well, although many other industries are also facing challenges, the cosmetic industry is in a worse situation as it is hard to find markets where goods can be exported to. In the case of China and South Korea, their quarantine and situation management is showing obvious signs of recovery, but it is a major concern in other regions such as ASEAN, the U.S. and Europe.
In addition to exports, other complex factors such as social distancing and the postponement of exhibitions are also making it worse. As not sufficient raw materials are being imported, it is difficult to manufacture certain items as needed. Statistics in February show that exports increased as much as 13.6% compared to the previous year with COVID-19 only have a limited impact. Since the end of February, however, the situation in Korea has become serious and it is expected that March exports will be affected significantly.
As many people wear a mask for a long time during the day, the number of consumers affected by skin issues is escalating. As such, COVID-19 has changed consumer needs. But how has COVID-19 affected cosmetic categories? What changes can we expect in the foreseeable future?
First of all, the need for hygiene-related items such as hand cleansers and sanitizers is rocketing. Now that the awareness of the need for better hygiene is more widespread among consumers, it is easy to predict that products including hand sanitizing wet wipes will be in greater demand. Since February, many companies have started homeworking. It is evident, therefore, that the demand for colour cosmetics will decrease. Now lighter face make-up is a preferred option since people have to wear face masks all day long. In the case of colour cosmetics, items that would smear less on masks are becoming more popular.
With COVID-19, we have seen a shift in distribution channels including a boom in online sales – are these changes going to stay with us throughout the crisis?
Statistical data shows that e-commerce markets are growing. For example, Coupan and The 11th, which are the two leaders in the Korean e-commerce arena are thriving. Their market share is growing as they are attracting older generations and even elderly people who are not active online purchasers. As people are working at home and tend to avoid going out, more consumers are watching YouTube, leading to more exposure for advertisers. As many new consumers are joining the existing purchasing groups, they have been given opportunities to gain a much larger e-commerce market share.
When it comes to The 11st and Coupan, can you give us examples of distribution channels or brands that have rolled out new strategies to cope with the current situation?
Small and medium-sized OEMs/ODMs have been focusing their production lines on hand sanitizers for the last two months. As sales at offline shops decreased as much as 50% in February, brands also started to actively promote and sell goods online. At major offline shops including H&B and department stores, no events are taking place due to the fear of the virus spreading. For example, Lotte Department Store has been developing and launching online events in conjunction with powerful beauty influencers from April onwards in order to minimize risks.
Certain brands such as Holika Holika and TERRAZEN are working with beauty ambassadors with good SNS promotion skills and their activities will be centred on online promotion. Many other brands such as CODE GLOKOLOR, Yellow Touch, Urban Decay, and Tonymoly are attracting consumers who are anxious about COVID-19 by promoting their concepts of make-up products that do not smear so much on masks or pure natural products that cause less trouble even if the user wears a mask for a long period.
With the general view that it will take a long time for a vaccine to be ready and that COVID-19 will be with us for a long period, what strategies should K-Beauty brands adopt?
The K-beauty industry will naturally be able to overcome this challenge with various strategies. Brands will swiftly come up with new product categories as a market strategy rather than merely producing certain products such as hand sanitizers. Cosmetic companies have already released new eye-catching items from light make-up items that do not come off on a mask to hand sanitizing wet wipes, spray for mask re-use, detergents dedicated to masks, and so forth.
As people stay home longer than before, the demand for home spa items is also expected to grow. Thus, brands should really focus on intense skincare products as well as aesthetic devices. Now that the use of online promotion and platforms is clearly more popular than before, it is vital for brands to take advantage of online promotion/sales channels actively.
According to you, what is the outlook for the K-beauty market in 2020?
Since 2019, aggressive competition among domestic companies as well as with overseas players (local brands in Japan and China) has caused major challenges. This year, the COVID-19 situation is making the situation even worse and I expect that it will remain complex until the second half of 2020. If the situation improves by the summer, the market might enter a recovery phase by the 4th quarter.
However, it is obvious that market conditions will continue to deteriorate for the time being. This problem is more drawn out with an economic slump at home and abroad, shrinking consumer confidence, K-beauty identity weakening, regulations on exporting, extended sanctions on exchange as well as the current negative image of Korea regarding COVID-19 as well as fiercer competition on a global scale. On the other hand, if the situation worsens in the U.S. and Europe, affecting their cosmetic manufacturers’ production negatively for a long period, then it will benefit countries such as Korea as the country should recover relatively fast by comparison.
*in-cosmetics Korea 2020 will be held at Coex, Hall C from 17 to 19 June.
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