Challenges and Opportunities of the Korean cosmetics market for European brands

Abstract

The Korean cosmetics market bears many challenges for European brands. Its structural conditions make it more difficult for them to achieve growth and profits. This paper shows first that distribution channels are contrasted and competition is intense on this market. This is especially the case on the low-end segment, creating a bias towards mass consumption. High consumers expectations and preference for Asian expertise contribute to the incentive for high quality at a low price, which leads to compressed margins. Therefore, the conditions on this market alone would not justify the effort of European brands to compete on it.

However, if we consider the recent influence of South Korea in Pacific Asia, and the exportation through the Korean wave not only of cultural, but also of commercial products, we can identify an opportunity for European brands. As a cultural mediator, Korea exports Korean products that are often hybridized, as the direct result of western influences, conveying western lifestyles and consumption practices. This paper will use the term of beauty hybridization to describe this process applied to the cosmetics sector. Following that second finding, it would thus be beneficial for European brands to use this exportation process to the rest of Pacific Asia through the mediation of the Korean market. South Korea could serve as a platform for European brands to reach the rest of Asia. European brands success in Korea could induce success in other Asian countries thanks to the Korean mediation.

It is true that European and Korean brands hold differentiated comparative advantages on the market. However, if we draw the consequences from the beauty hybridization and Korean mediation process, we see that European brands can also learn, on segments where they dont hold a comparative advantage, best practices and know-how that are likely to be spread all over Asia.