"Gmarket and 11st 'Recommendations' Are Better Than Department Store 1st Floor"

Changed Domestic Cosmetics Sales Market
Last Year Retail Store Share 52.8%
Online 47%, Gap Significantly Narrowed
Expecting Sales Share Reversal Due to COVID-19 This Year

[Asia Economy Reporter Cha Min-young] "In the cosmetics industry, there is already a trend of preferring the top positions such as 'power recommendations' given by e-commerce platforms over the first floor of department stores, which require expensive commissions." (A representative from a major cosmetics company A)

The domestic online cosmetics sales market is heating up. Last year, the gap in market share between online and offline sales channels narrowed to single digits, and this year is expected to be the first year when online sales surpass offline sales, riding on the wave of the COVID-19 pandemic.

◆ Online catching up to offline closely = According to global research firm Euromonitor on the 22nd, the market share of offline cosmetics retail stores in Korea was 52.8% in 2019, narrowing the gap to online sales (47.0%) to 5.8 percentage points. The gap between online and offline cosmetics sales was 30.5% in 2015 but steadily decreased to 27.1% in 2016, 22.1% in 2017, and 10.1% in 2018. Expectations are high that this year the proportions of online and offline channels will reverse. Especially since the COVID-19 outbreak began spreading at the end of January, the non-face-to-face (untact) trend has intensified, further deepening this phenomenon. Even when many offline road shops fell into situations where they could not even pay rent due to poor sales, online sales remained robust. However, online sales here refer to a relative concept compared to store-based sales and include e-commerce, direct sales, and home shopping combined.

The advantages of online malls cited by the cosmetics industry are low entry fees and flexibility in marketing. The entry commission required by department stores is estimated to be around 35%, even considering slight differences. Large e-commerce companies in the form of open markets have commissions in the 10% range, showing a significant difference. Online curated shops that handle everything from product sourcing to planning and after-sales service (AS) charge around 25-30%.

Another strength is the advantage in online marketing, such as beauty YouTubers. Most cosmetic demonstrations or viral videos are linked to online and mobile-based platforms like Instagram and YouTube, which are often not fully utilized offline. There is also a growing tendency to trust influencers' reviews more than personal use. Additionally, the relative ease of overseas expansion is considered an advantage. LF’s own men’s cosmetics brand 'Hazzys Man Rule429' entered Xiaohongshu, China’s largest social network service (SNS) commerce platform, in January and has been achieving 50% monthly sales growth. The MZ generation (a combination of Millennials and Generation Z), which values empathy, is enthusiastic about online and mobile platforms with many reviews, which is also seen as a contributing factor.

◆ Both large and indie beauty companies go online = Since COVID-19, not only indie cosmetics but also large beauty companies have been thoroughly reviewing their annual offline event plans and reorganizing marketing channels to focus on online. The online fashion and lifestyle curated shop 'Hago' has increased the number of cosmetics brands it hosts to 10 since the beginning of the year. About 40 other brands have also signed contracts and are waiting to enter. eBay Korea, which operates Gmarket and Auction, is holding a major cosmetics event during this month’s first half 'Big Smile Day.' Amorepacific is actively running special exhibitions for 'Hera,' 'Laneige,' and 'Innisfree.' Nature Republic also explained that products that first gained popularity online on platforms like 11st are continuing to be popular in offline road shops. This trend is even more pronounced among indie cosmetics brands that lack funding and have difficulty with mass production.

There is an analysis that the possibility of online sales methods in the beauty industry surpassing offline store-based sales depends on oral care products and perfumes. So far, the e-commerce market has been focused on hair care and masstige cosmetics, which are frequently used and have little individual variation.

Hong Hee-jung, Senior Researcher of Beauty & Fashion at Euromonitor International Korea, said, "The Korean cosmetics market, which had been showing an increasing trend in non-store sales, is expected to shift even faster to non-store channels after COVID-19. In particular, e-commerce is expected to play a major role, and convenient refund policies, inclusion of cosmetic samples, and detailed explanatory strategies will become key weapons in the future."

This content was produced with the assistance of AI translation services.