During the 26th Small and Medium Business CEO Breakfast Meeting held by the Korea Cosmetics Association, Bill Lee, a partner for Asia Renaissance, delivered a presentation discussing the future of the Korean and global cosmetics space.
According to Mr. Lee, “the Korean cosmetics industry has grown since 2013, but the bubble is bursting after reaching the top. Innovative products such as BB cream, cushion foundations and facial sheet masks already got into the mid of red ocean since those had made huge success only several years in the beginning. And the future is uncertain as K-beauty has been collapsing due to the absence of a solid distribution system to the global market and the failure of price policies between domestic and global.”
With regards to next steps, Mr. Lee called for a change in perspective with regards to globalization, stating that Korean companies must be willing to adopt a localization strategy when expanding into international markets. In his words: “In order for Korean companies to prevent becoming fragile in their overseas operations, they must change their export-oriented thinking. They must focus on the local business and must know the local consumers. You should consider target regions' consumer's needs when develop products instead focusing only the needs for Korean consumers to sell them to different regions. Balance between those needs is so important”
Mr. Lee went on to emphasize the importance of securing local distribution networks when attempting to expand into international markets, as local partners that are not entirely familiar with the cosmetics business may inhibit companies from maximizing their international potentials: “You need to take control of the distribution network, even if it means acquiring foreign companies.” To address the aforementioned lack of innovative products, Mr. Lee urged companies to invest in R&D as well, stating that while “the Korean cosmetics industry has grown a lot in skin care, fashion-addressed areas such as hair and nails are still insufficient.”
However, according to Mr. Lee, the Korean cosmetic industry is also in need of government aid. While China continues to loom as a growing threat, global companies are also acquiring local Korean companies to regain presence in the low and mid-price markets. Mr. Lee warns: “In this situation, Korea is simply fulfilling orders and manufacturing products – we must consider what will happen if the orders were to move to another country such as China in near future .”
He concluded his lecture by stating the following: “We need national-level government support to continue K-beauty success being owed to not only 20,000 cosmetic companies but also 400,000 employees . We’re running out of time.”
Mr. Lee is currently the head of Asia Renaissance’s beauty & personal care practice. The firm itself has had a long-standing commitment to structuring mergers and acquisitions, strategic partnerships, joint ventures, and capital raising transactions within the beauty & personal care space.
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