Little-known brands enter spotlight as K-beauty reaches new global markets

"Small but mighty" aptly describes the current Korean cosmetic export market, where small indie brands are taking center stage — a significant shift from the past when only products produced by large conglomerates stood out.

Olive Young's store in Myeong-dong, central Seoul [CJ OLIVE YOUNG]

"Small but mighty" aptly describes the current Korean cosmetic export market, where small indie brands are taking center stage — a significant shift from the past when only products produced by large conglomerates stood out.

Until the 2010s, two major cosmetic conglomerates — Amorepacific and LG Household & Health (LG H&H) — took up almost 90 percent of the export market. However, indie brands, or new small- and medium-sized enterprises (SMEs), are gaining traction, standing at 68.7 percent of the cosmetic export market during the first half of the year.

Such a shift was possible due to the rise of stores like Olive Young, global marketing via social media and businesses expanding beyond the Chinese market.

Rise of unfamiliar names

K-beauty is now experiencing a new heyday with the emergence of unfamiliar names such as d’Alba and Numbuzin.

“I’m here to buy d’Alba mist, which is one the most popular products in Japan,” Hinaki, a Japanese tourist who came to Korea with her friend, said to the JoongAng Ilbo, an affiliate of the Korea JoongAng Daily, while showing her shopping bag filled with Korean cosmetics and supplements.

The inside of Olive Young Myeongdong Town in central Seoul [JOONGANG ILBO]

The Olive Young store in Myeong-dong, central Seoul, was bustling with foreign tourists last month. Over 90 percent of the customers were from overseas, mostly hailing from Southeast Asia and Japan.

“Recently, one of the most often asked about products from foreigners is Hince’s foundation cushion,” an employee at the store said.

“In the past, they used to buy products with high sales without question, but now, they memorize the product numbers and ask for them, which are for products that even Koreans don’t know well,” the employee added.

The growth of SMEs

According to the Ministry of SMEs and Startups, cosmetic exports by large companies in the first half of the year were 23 percent lower than in the first half of last year, while exports from midsized enterprises were up 16.3 percent. Small- and medium-sized companies' exports were up 30.8 percent.

Buyers examine products from small- and medium-sized Korean companies during Seoul Beauty Week 2024 at Dongdaemun Design Plaza (DDP) in Jung District, central Seoul, on Oct. 1. [YONHAP]

“While the situation for small- and medium-sized enterprises isn’t great overall, the beauty companies are experiencing something entirely different,” a beauty industry insider said.

In the past, small- and medium-sized brands have often tried to enter the market, only to be pushed out by large companies. However, things have changed as the distribution channel has shifted online and to drugstores, making it easier for lesser-known products to penetrate the market.

The shift allowed them to sell products offline without having their own store, as they have secured some 1,000 drugstore distribution networks nationwide. It also enabled them to lure customers with their own discount sales.

As a result, this led to the current boom of indie brand products.

Foreigners pass by the Olive Young Hongdae Town store in Mapo District, western Seoul. [CJ OLIVE YOUNG]

“Indie brands are choosing to enter drugstores like Olive Young to gain more access and awareness, instead of investing in opening stores with high fixed costs,” Lee Hae-ni, a researcher at Eugene Investment & Securities, said. “Deciding to enter Olive Young, even though it has high commissions, played a big role in their growth.”

“Over half, 51 percent, of the brands that earned over 10 billion won ($7.2 million) last year were domestic indie brands,” CJ Olive Young, the operator of Olive Young, said. “During the August and September sales period, new brands that entered Olive Young less than five years ago, such as Numbuzin, Biodance and VT, ranked high on foreign purchasers' lists.”

A different strategy

Indie brands that started to gain awareness through drugstores are now entering the export market after getting recognition overseas by using social media platforms, such as Instagram Reels, YouTube Shorts and TikTok.

The global success of those brands proves that their strategy of building brand awareness through social media, influencers and securing loyal customers is effective, instead of establishing a local distribution network or investing in expensive billboards like conglomerates do.

An image of Biodance's facial mask, which ranks as the No.1 bestselling facial mask on Amazon [AMAZON]

Thanks to such a strategy, facial mask-making brand Biodance is ranked No. 1 on Amazon’s facial mask list, even though it is a latecomer to the field — having started its business in 2021. This was possible, as its promotional videos recorded over 14 million views on social media platforms, such as TikTok, leading them to dominate the facial mask market in North America and Japan.

Another strategy that supported the indie brands’ success was knocking on the doors of niche beauty markets like the United States and Southeast Asia instead of China, which was a major K-beauty exporter, and swiftly responding to market changes.

In the 2010s, cosmetics exports were mainly driven by Chinese merchants. However, this shifted during the Covid-19 pandemic when overseas customers started to buy products directly from domestic networks, using platforms like Amazon.

A booth stand at Seoul Beauty Week 2024 at Dongdaemun Design Plaza (DDP) in Jung District, central Seoul, on Oct. 1 [NEWS1]

“The decision to move focus away from China to non-Chinese markets, based on the assessment that the intermediate vendor distribution system will not last any longer, hit the mark,” an insider at Silicon2, a company that mediates business-to-business relations for some 200 indie cosmetic brands, said. “More recently, we are continuing to explore new markets beyond the United States to Europe and the Middle East.”

Race to acquire indie brands

Recently, major companies like Amorepacific have been racing to acquire indie brands as their value grows day by day.

Last year, Amorepacific acquired additional shares of skincare company Cosrx, bringing it in as its subsidiary. Meanwhile, Cosrx’s revenue has grown over 300 percent, offsetting the low performance of its parent company, Amorepacific.

Also, many major companies that acquire indie brands ensure that small- and medium-sized businesses manage their own companies independently, allowing them to maintain their unique brand identities.

Visitors look around at cosmetics booths during Seoul Beauty Week 2024 at Dongdaemun Design Plaza (DDP) in Jung District, central Seoul, on Oct. 1. [NEWS1]

LG H&H announced last year when acquiring Vivawave, which is behind the development and sales of cosmetic brand Hince, that it “will develop Hince's unique characteristics through an independent management system.”

Shinsegae International also acquired beauty brand Amuse in August, saying, “We decided to pursue acquisitions of Amuse to diversify our brand’s portfolio, which has been heavily focused on high-end luxury lines.”

“Given that indie brands excel at quickly developing products with a youthful sensibility, we will respect its independent management and not operate it under a corporate system.”

Future of indie brands

Though some are concerned that the popularity of indie brands may just be a fleeting fad as beauty trends rapidly change, the prevailing outlook is that the popularity of indie brands will continue for the time being due to upcoming Black Friday events in the United States, year-end festivities and the exploration of new markets.

“Following the global consumption downturn, low-priced products have gained more demand, benefiting affordable domestic brands,” Park Jong-hyun, a researcher at Daol Investment & Securities, said. “Focusing on the North American market, cost-effective indie brand products are expected to continue their steady growth.”

BY OH YOO-JIN [kjdculture@joongang.co.kr]