ITA CODE: COS
Total Market Size
Total Local Production
Imports from the U.S.
Exchange Rate: USD1=KRW 1,054 (2014); 1,132 (2015); 1,161 (2016); 1,131 (2017)
Sources: Korea Cosmetic Association (KCA), Korea Health Industry Development Institute
Unit: USD million
Total market size: Total local production – total exports + total imports
South Korea is the 8th largest cosmetics market in the world, representing nearly 3.0% of the global market. In 2016, the market size was estimated to be USD 8.5 billion; the total local production and total exports increased approximately 21.6% and 46.8% respectively from the previous year. The market has grown by an annual growth rate of 7.4% for the last 5 years (2012-2016).
Meanwhile, total imports of cosmetics in 2016 went up 5.3% valued at USD 1.46 billion. U.S. imports accounted for 27.1% of the total import market share at USD 398 million. On a country by country basis, the U.S. is the largest exporter to Korea in 2016, followed by France (USD 363 million) and Japan (USD 210 million). U.S. imports decreased 11.2% from the previous year.
According to Korea Customs Service statistics, skincare cosmetics continued to be the largest import category at 47.5%, or USD 726 million, of total cosmetic imports in 2017. Haircare products, makeup cosmetics, and perfumes and scents accounted for 14.8%, 13.1%, and 11.4% of the total import market respectively.
There is a large variety of products in the market; competitive imports differentiate themselves from existing offerings through brand identity, packaging, unique formulations and ingredients. U.S. brands generally have a good reputation for their technologically advanced product formulations and product safety.
Imported cosmetics are primarily sold through online shopping malls (34.7%), specialty stores (21.4%), medical institutions (9.0%; hospitals, clinics, drug stores), multi-level marketing (6.1%), department stores (5.4%), select shops (4.4%), home shopping channels (2.8%), hypermarkets (2.3%), and others.
In terms of imported cosmetics’ sales volume, sales through online shopping malls amounted to USD 1.16 billion, accounting for 22.1% of total imported cosmetics sales, followed by department stores (USD 1.06 billion, 20.0%), and select shops (USD 852 million, 16.1%).
Strong potential subsectors for U.S. exporters to South Korea include cosmeceuticals and derma-cosmetics. The market size of the derma-cosmetics has been growing for the recent three years by more than 10%. The industry insiders expect that the derma cosmetics market, currently estimated at USD 430 million, will expand to more than double in 2020 with the concept of preventative care. Anti-pollution, anti-aging, and antioxidants related technologies are hot new trends. When it comes to ingredients, natural/organic/stem cells/probiotics, and peptides ingredients are the focus of attention these days.
In South Korea, cosmetics are regulated by the Ministry of Food and Drug Safety (MFDS). Cosmetics fall under two categories: functional cosmetics and regular cosmetics. Functional cosmetics, which was previously comprised of whitening, anti-wrinkle, and sunscreen & tanning products, have been extended to 10 categories by the MFDA including hair colorants, hair nutrients, and cosmetics that help protect damaged skin as of June 2017. MFDS reviews only functional cosmetics for pre-market approval. For all other regular cosmetics, the Korea Pharmaceutical Traders Association (KPTA) has been authorized by MFDS to review and certify import permission requests submitted by the Korean importer.
As of 2016, 1,335 firms were registered as cosmetics importers. Among them, 865 were agents/distributors, 200 branch offices and 270 parallel importers and others. A qualified Korean representative is critical to successfully penetrate the market for two reasons. First, Korean distributors know their customers and competitors well, and can monitor market changes. Secondly, the importer/distributor of the foreign supplier must submit required documents to MFDS or KPTA to obtain pre-market licenses.
Under the implementation of U.S.–Korea Free Trade Agreement (KORUS FTA) in March 2012, tariffs on imported cosmetics have been reduced. Remaining Korean tariffs on imported US cosmetics will be eliminated over a ten-year period. These market trends signal good opportunities for U.S. companies in the years ahead.
E-commerce channels are becoming increasingly popular for consumers to purchase cosmetic products.
South Korea stands out as the country with the highest smartphone ownership rate/broadband penetration rate and fastest average internet speed. Sales via mobile shopping have increased dramatically in recent years. Of the total online shopping, the percentage of mobile shopping jumped from 17.0% in 2013 to 54.2% in 2016. This trend reflects the new shopping style called ‘morooming’, which refers to people who “window shop” offline and then purchase online.
Distribution channels are changing on the focus of consumer experience. Since the demand for new retail channels has become larger and consumer demands segmented, various channels such as select shops and multi shops are becoming more prevalent. In line with this trend, Shinsegae Group launched a multi-brand beauty products boutique named CHICOR in December 2016 and offers not only luxury brands but also less expensive products well-known to heavy cosmetics users. Categories have more segmented and specialized from existing line make-up, skin, body, hair, and men to beauty tools, kids, room fragrances, lifestyle products.
Seoul Cosmetics & Beauty Expo 2019
Ministry of Food and Drug Safety (MFDS) - http://www.mfds.go.kr/eng/index.do
Korea Pharmaceutical Traders Association (KPTA) - http://www.kpta.or.kr/eng/main/main.asp
Korea Cosmetic Association (KCA) - http://www.kcia.or.kr/ENG/_Document/About/about01.html
Ms. Heesook Baik
U.S. Embassy Seoul
188 Sejong-daero, Jongro-gu
Seoul 03141, Korea
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