[비즈한국] The exit of Sephora, the world’s largest beauty retailer, from the Korean market in the first half of this year highlighted the formidable barrier that is K-Beauty. Sephora, operated by the French luxury conglomerate LVMH, has long reigned as a "beauty dinosaur" in the global market. While it entered the Korean market in October 2019, its performance deteriorated due to the COVID-19 pandemic that began in 2020. Ironically, while Sephora struggled, the K-Beauty market surged during the pandemic to become a global trend.
K-Beauty began to stand out in the global market thanks to the chain reaction of successes of the K-Brand. As the awareness of Korean culture has risen—spanning from K-Dramas and K-Pop to K-Food—K-Beauty has also begun to gain global recognition. Recently, as the song "APT.," featuring BLACKPINK's Rosé and inspired by a Korean drinking game, became a global hit, not only K-Culture and K-Liquor have gained attention, but even the makeup artist who worked on Rosé and the related products have become hot topics.
Lee Hae-ni, a researcher at Eugene Investment & Securities, stated, "The popularity of K-Beauty as a trend will naturally fade over time, but it will remain as a distinct genre," adding, "Because K-Beauty possesses strong product quality, planning capabilities, and reasonable prices, it is highly likely to establish itself as a lasting genre."
Furthermore, K-Beauty is increasing its penetration beyond the traditional Chinese market, raising expectations for performance. Jeong Han-sol, a researcher at Daishin Securities, noted, "Although the penetration rate of Korean cosmetics in the U.S. market remains low, K-Beauty is establishing itself as a standalone category and expanding its influence there," adding, "Unlike the past, it is positive that growth is not limited to a single country, but continues to expand exports to diverse regions like Europe and the Middle East."
K-Beauty has emerged as a revenue-generating item not only in e-commerce but also in offline retail channels like large hypermarkets. This is the exact reason why companies like Musinsa and Market Kurly are hosting offline beauty events, and Coupang has launched R.LUX, a premium beauty "Rocket Delivery" service. Even budget retailers like Daiso are targeting consumers by producing products from major brands at low price points, and convenience stores are collaborating with skincare brands to develop their own cosmetics, reflecting the intense focus on cosmetics across various retail channels.
However, cosmetics stocks in the domestic stock market have recently shown a different picture than expected. Amorepacific090430, a leading cosmetics stock, has fallen by more than 18% this month, while LG Household & Health Care051900 and Kolmar Korea161890 have also dropped by more than 8%. The recent slump in cosmetic stocks is due to concerns over a global consumption slowdown.
Kim Myung-joo, a researcher at Korea Investment & Securities, explained, "Investors' concerns about competition within the U.S. cosmetics industry are growing," and "The somewhat disappointing earnings recently announced by global consumer goods companies have also dampened investment sentiment in the sector."
Nevertheless, some argue that now is the time to invest in cosmetics stocks because reliance on the Chinese market is decreasing and indie brands are thriving. Researcher Jeong Han-sol pointed out, "As of the 18th, the 12-month forward price-to-earnings (P/E) ratio for the cosmetics sector has fallen to around 13 times due to the continued sluggishness of large companies' business in China during the second quarter, lowered performance expectations, and concerns over an 'export peak-out'," adding, "Valuation attractiveness has improved compared to the 17 times at the beginning of the year." Park Hyun-jin, a researcher at Shinhan Securities, also said, "It appears to be a tug-of-war between whether cosmetics companies will show better growth rates in the second half than the first, or if capital will move to other sectors highlighted as new growth stocks, but the concerns are excessive."
At the end of the year, cosmetics companies typically release "holiday limited editions" or stimulate consumer desire for collectibles through collaborations with nostalgic characters like Hello Kitty, Crayon Shin-chan, or Cardcaptor Sakura. However, "Dupe" consumption has become a trend among young consumers, moving away from blind brand loyalty, and products targeting this are being released one after another. "Dupe" is a neologism derived from "duplication," referring to the consumption of affordable products that are similar to expensive, popular items. Researcher Lee Hae-ni stated, "There are an increasing number of TikTok videos comparing luxury foreign brand cosmetics with Korean brand cosmetics," adding, "This shows that Korean cosmetics have product quality comparable to high-end luxury brands, and an increasing number of consumers are recognizing this."