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Lily Twelve Tree
And welcome back to the Bare Face Podcast, a beauty business podcast hosted by yours truly. My name is Lily twelve Tree and I'm a digital marketer and data science student. In today's episode, we're going to have a look at how Korean skincare has just taken over the world. The K beauty boom may seem to have come out of nowhere, but in reality, it's been anything but random. K Beauty first arrived on the global beauty scene around a decade ago, but in the last one to two years, there's been an insane surge in growth and I feel like we've really, really felt that on platforms like TikTok, K Beauty is forecast to grow three times faster than the beauty industry as a whole, with a compound annual growth rate of 9.4%. While beauty sits at 3.1. With Unilever buying Kava Korea for $2.7 billion in 2017, Amore Pacific acquiring Cosrx for 145 million in 2021. L'Oreal acquiring Still Nada for 390 million in 2020. 23K Beauty has well and truly passed niche beauty status. Today's episode is going to be broken down into three parts. Firstly, why is Korean skincare so effective? How is Korean skincare different to Western skincare? Finally, how did Korean skincare go global? On a personal note, as someone with super acne prone skin, I was on Roacatane, a really strong acne medication in my teenage years. And a couple of years after getting off of it, all of my acne came back and I had hopes of going back on it and had essentially given up on skincare because I was just so frustrated on how much I felt like I was throwing away my money when it came to trying products. And one day I walked into Australian K beauty retailer W Cosmetics with a friend of mine and was just blown away, honestly, mostly by the price points. And what has been even crazier is how now my skin is the clearest it's been in my adult life. So I've just become obsessed with Korean skincare and more specifically, the business of Korean skincare, because it's a pretty new category I'm fascinated by. How is it so good? Why did it get so big? How are people so open to trying these new ingredients? And then also, how is it so incredibly affordable? All of those questions are exactly what we're going to look into today. Okay, so firstly, why is Korean skincare so effective? Hallyu is the Korean word for the Korean wave, which is this idea that the South Korean pop culture has grown in prominence to become a major driver in global culture. Summarized by Vox Hallyu has been building for two decades, but K Pop Korean pop in particular has become increasingly visible to global audiences. In the last five to 10 years, the export of K Pop has ballooned South Korea's music industry to an impressive $5 billion industry. This right here captures the first thing we have to understand, which is about the Korean and their focus on exports. South Korea has an incredibly limited natural resources, which has led to a strong dependency on imports for raw materials and as a result, the growth of the economy has come entirely from an export orientated economic model. Essentially what this means is that Korea is an industrialized manufacturing country. They have to create and sell things more innovative than anywhere else in the world to ensure their country keeps earning money. For South Korea, this looks like a heavy focus in technology. Automotive, shipbuilding, entertainment, cosmetics and electronics companies like Samsung, lg, Hyundai and Kia are all global players and generate a large share of the country's gdp. But bringing it back to beauty. What this means is that because the country is so focused on advanced manufacturing capabilities, it can develop and produce cutting edge skincare and makeup products efficiently. Companies invest heavily in research, development, R D to create innovative products and ingredients which allow it to stand out in the global market. According to Statista, South Korea is the second largest cosmetic exporter in the world, only behind France, which is home to the largest beauty conglomerate in the world, L'Oreal, as well as other conglomerates like Guerlain, Lancome and Garnier. If you listen to last week's episode where we spoke about how much power the beauty retailer Mecca has in Australia and how because essentially they have no real competition, they can kind of just do whatever they want. The K beauty landscape is the direct opposite of that. There are so many K beauty brands, skincare brands in particular, that all of that competition drives product innovation and price. From uncovering new ingredients like snail mucin, ginseng and fermented ingredients, or essentially building entire new skincare subcategories like cleansing balms, essences, daily masking and pimple patches, the way to win in the Korean skincare market is through advancements and price points rather than what we typically see in the west, where a brand success is more closely tied to their marketing efforts. In the west, we see a lot of conversations about product market fit, like is there a desire for someone to create this ingredient? Rather than in Korea, it's more about innovation for innovation's sake. This high level of competition is exactly why K beauty is so well priced because if you want to compete, you not only have to have a great product, but at a fair price point. It doesn't stop at product innovation either, as Korea is home to some of the most advanced beauty treatments and services in the world. Beauty services like aqua oxygen peels, cryotherapy, facials, mesotherapy, modeling masks and LED light therapy have advanced so much in Korea that it's become a popular destination for cosmetic tourism. On South Korea's official website for tourism under Things to Do, they have a page dedicated to medical tourism where they outline Korea occupies a 25,5% share of the global cosmetic surgery market. They also Cite that in 201990404 foreign patients visited their plastic surgery department. Part 2 How is Korean skincare different to Western skincare? The first huge difference between the two is in routines. K Beauty follows an entirely different philosophy focused around care and routines compared to the Western focus on reactionary concerns I can best explain what I mean by by this by the results of this little comparative analysis I ran. So skincare concerns are either defined as preventative or reactionary. Preventative products are used to avoid something happening to your skin, and then reactionary products are products that are used once a skincare concern has developed. Kind of understandably, reactionary is often the easiest to sell because it's the easiest for consumers to visibly see and therefore measure a product working for them. It's hard to measure how well a product has worked at stopping something from happening that hasn't actually happened, if that makes sense. So when we look at Sephora's US websites, there is not a single prevention skincare concern listed. They're all instead reactionary. Those concerns are acne and blemishes, anti aging, dark spots, pores, dryness, wrinkles and dullness. But if we compare that to Korea's number one beauty retailer, Olive Young, they have 18 concerns you can shop by on their website. While only eight of those are preventative concerns, they make up the majority of Olive Young's product offering, coming to a total of 62%. That includes things like deep cleansing, fine dust removal, low irritant cleansing, moisturizing, sun care, well, aging. I think the emphasis of prevention and K Beauty is also really well highlighted by their love of sunscreen, but essentially by promoting the use of products for longer in the way of prevention, that model is not only going to leave consumer with greater result because everything's a lot gentler and works a lot slower, but it also makes companies a heap of money because when you look at how K Beauty first started to gain traction in the US in particular in the early 2010s. One concept that got rinsed and repeated was the 10 step skincare routine. Those 10 steps include oil cleansing, water cleansing, exfoliating, toning essence treatments, sheet masks, eye creams, moisturizers, and finally spf. This extensive routine starts to demonstrate why all the big beauty conglomerates are fighting for a piece of the K Beauty pie. To quote business of fashion, South Korean women for whom flawless skin is the ultimate beauty ideal are reported to spend twice as much of their income on beauty and makeup products as their American counterparts, with the average Korean skincare regime consisting of at least 10 steps. So while the products have to be more affordable to be competitive, how Korean brands have combated that lower average order value is by increasing the number of products you supposedly need in your routines. The idea of the Korean 10 step skin care routine is 10 potential products being used in a certain order to achieve maximum results. While it was never intended to be a minimum of 10 steps, it quickly became that as we all know, our consumption habits and it's easier to market and it's easier to sell. Understandably, the idea of 10 steps in a skincare routine had a bit of a reaction and backlash, not only to the inference that you need to purchase 10 products to have good skin, but also the time commitment to do that morning and night. Today's episode is sponsored by the Bareface newsletter. Yes, we are sponsoring our own podcast. If you work in beauty, then I'm sure you're very aware of the lack of data available in this industry. And that was until I decided to develop it myself. Bareface is a research and insights company that specializes in beauty. We help beauty brands utilize data to understand the ever changing beauty consumer. Every week the newsletter looks at a trending topic in the industry and I set out to write several pieces of code to understand that topic objectively. This week, for example, we dove into conversations around Shrinkflation, the phenomenon where companies keep product prices the same while reducing the volume of the product. I went back to 2014 versions of Ulta and Sephora's websites to find the prices and weights of 45 products. After accounting for inflation and any changes in product weight, I found only seven were priced above what we would have expected for 2024. This raised a new set of questions. Firstly, if beauty prices are rising slower than the rate of inflation, why are consumers so outraged? And then secondly, how are brands managing to keep product prices below inflation? If that's a resource that you're interested in Be sure to head to bareface.substack.com and sign up today. Part 3 How did Korean Skincare take Over? So as I previously mentioned, K Pop was already having global success in the early 2010s, but the K Beauty craze emerged in the US particularly when two major Korean beauty retailers were established. In 2012, Charlotte Cho Co founded Soco Glam. Soco Glam is a US based online retailer that sells exclusively K Beauty. They are known for popularizing the 10 step Korean skincare routine in the West. Charlotte grew up in California, but after moving to Korea for work learned about all things Koreans were doing differently in the beauty space and immediately saw the potential of those types of products in the US. Also in 2012, Alicia Yoon launched Peach and Lily, now a skincare brand, but back then was solely a multi brand E retailer. What was really interesting is that before Peach and Lily launched, Alicia Yoon launched a focus group of 100 people including Asian Americans and non Asian Americans. They found that many Asian American customers had mothers that used K Beauty products and were aware of them but hadn't yet tried them themselves. Non Asian Americans had never heard of the term K Beauty. This echoes what Charlotte Cho, the co founder of Soco Glam, told Shondaland that during our first few years of business we focused on not only educating our community about ingredients and the best skincare practices, but the concepts and philosophies that K Beauty was built on, like the Korean Skin first philosophy. Both this study and this anecdote from Charlotte really highlight how hard it would have been to launch a completely new way of doing skincare, which obviously came with new brands and ingredients, but having that cultural attachment would have been so hard to sell. When we consider how Asian culture has historically been treated by conservative Americans, what's important to know around this time was this was a few years after we'd started to see the birth and shift towards E commerce. So people buying beauty products online, traditionally you would have wanted to play and try beauty products before you buy. Which if you think about it in the context of skincare, is kind of funny because you can't actually tell how good a skincare product is just by feeling its texture in store. But still, that was a preference for many consumers. This move away from needing to have a retail footprint to grow as a retailer is what drastically reduced the startup cost, allowing new players like Soko Glamour and Peach and Lily to enter the market because people were more open to trying brands they'd never heard of rather than needing the backing of a major conglomerate like an Estee lauder or a L'Oreal. With the emergence of E Commerce also came the birth of indie brands. Indie, much like in a music context, means independent. So again, they didn't have that backing of a L'Oreal or Estee Lauder to legitimize their product. It was all of those changes that happened right before Soko, Glam and Peach and Lily launched in the US that shifted the US market in particular towards one that was excited by the differences of Korean skincare rather than turned away by those differences. So when K Beauty first launched in the early 2010s, it was met with a lot of excitement. The new methodology, all the new brands and ingredients were embraced by those that are heavily involved in the skincare space, but they were yet to have mass appeal. But that first wave of success drove more and more brands to be stocked in retailers like soco, Glam, Sephora started to pay attention and slowly started adding K Beauty brands to its offering. But with every Korean product that took off, another international brand would launch their own take on a Korean product like pimple patches, essences or cleansing balms without any remnants of being Korean. So the hype around K Beauty really started to dwindle in kind of the mid 2010s. That was until last year in 2023 when the Korean trend of glass skin, a trend that refers to a luminous, radiant and flawless complexion that's meant to resemble glass, took off on TikTok. Slightly different to the western trends in like the Clean Girl, but similar enough that the roller door of high effort routines promising perfect beauty let the glass trend in. And it took off mostly on TikTok, but also very much on Instagram, Pinterest, Facebook. It was everywh what set it apart from the Clean Girl, for example, were first of all it being started and driven by Korean creators who were also championing Korean skincare products. It was so big that the Viral Cosrx Advanced Snail 96 Mucin Power Essence became the number one best selling product on Amazon. And without disregarding the performance of the snail essence, there is something to be said for the the gimmick factor of this product and a lot of the shock value that comes from K Beauty ingredients because they're so different to what we've seen traditionally in the west. Like the viscosity or like the goo concentration of the snail essence, along with the fact that it comes from a literal snail, was different enough and almost jarring enough to get someone's attention and break up their social media feeds, which as we know is now very much the goal of every brand. As skincare content has grown in favor of experts and education, audiences are now interested in ingredient conversations, product layering, skin barriers, slugging the difference between actives and all of this has primed them for K Beauty. Not to mention the sticker shop of shopping for Korean skincare and being drastically cheaper than most brands you would find at Sephora. Data from spate indicates that 6 out of the top 10 skincare brands for views on TikTok measured by quarter over quarter growth were K Beauty brands. And just as significantly, the growth of these K Beauty brands has been largely organic, where for the other four US based brands it's mainly been driven by paid content. Olay, for example, rakes in a weekly average of 76.2 million views on TikTok. The brand's quarter over quarter views are up 248 million, but 97% of those views are paid content. K Beauty has just met the consumer perfectly where they are right now. Laneige is seeing double digit sales growth in the US after their sleep masks went viral on TikTok. Glamzilla sold out the Innisfree Dew Glow moisturizer on Sephora US and Canadian websites within 48 hours after she suggested it was a dupe for Tatcha's Dewy Skin Cream. Even brands that aren't K Beauty brands themselves are being associated with it, as Business of Fashion pointed out. Hero Cosmetics finds itself in Ulta Beauty's K Beauty site section thanks to products like Zitstickers and its rescue balm for slugging. Hero doesn't actively identify as a K Beauty brand despite being inspired by K Beauty products, but they do use search engine optimized blog posts for Korean skincare trends to capitalize on the interest. The excitement around K Beauty is just too big for brands to deny. Cashing in on K Beauty is quickly moving from being a trend to becoming a category. Ulta Beauty has installed K Beauty end caps on over 150 stores. K Beauty retailer W Cosmetics is steadily expanding its store network across Australia, currently operating 28 stores, which is six more stores than Sephora has opened in the country. And Sephora and Cult Beauty have given K Beauty their own category pages on their websites. And that brings us to the end of today's episode. Thank you so much for making it to the end. If you enjoyed this episode, please be sure to give the podcast a follow and rate it as it really helps other people find the podcast. And if you want to chat about this episode, please feel free to reach out on Instagram, AreFace Media and otherwise Aussie listeners. I'll see you next Friday. And everyone else, I'll see you next Thursday. This episode was recorded on Ghana country. I acknowledge the traditional custodians of this land and pay my respects to elders past and present.