[THE INVESTOR] Until recently, the only cosmetic products customers could find at convenience stores were miniature skin care products -- typically packaged in travel kits.
Major convenience store chains, however, are venturing into what is viewed as drugstore territory, with the launch of affordable and fashion-forward lines of makeup, looking to appeal to millennial consumers.
In Korea, beauty products constitute a 300 billion won (US$276 million) industry, which increased 20 percent on-year in 2016.
And more convenience stores are looking to grab a chunk of the market share.
Earlier this month, GS25, a convenience store chain under GS Retail, launched private makeup brand Lovey Buddy, partnering with local cosmetics brand Tonymoly.
From face creams to makeup, the items are affordably priced from 3,900 won to 5,500 won.
“Almost every girl at my school wears makeup. I think it is good for young purchasers like me to easily buy popular brand’s cosmetics like Tonymoly at convenience stores, at a much cheaper price but similar quality,” said Jang In-young, 16.
According to industry data, sales of cosmetics for teenagers continued to rise in 2017, with 29 percent growth on-year.
Sales of cosmetics targeting young customers have been on an upward turn since 2015, recording 94 percent and 251 percent growth in 2015 and 2016.
According to GS25, its cosmetics sales grew 16.9 percent from 2015 on-year, 19.7 percent in 2016 and 24.8 percent in 2017, continuing a steady upward trend each year.
It plans to have more chains to include its makeup lineup on the shelves of some 1,000 stores across Korea within this year.
In March last year, 7-Eleven launched a well-rounded collection of 19 cosmetics and cosmetic accessories for the face, eyes and lips called 0720. It focused on offering products for day or night use, different complexion types and skin tones.
“The name of the brand ‘0720’ refers to 7:20 a.m., the time when teenage girls get ready to go to school,” said Lee Na-ra from 7-Eleven.
“While convenience stores are being developed as a place for a comprehensive place where you can find all you need, more nonfood and differentiated products will fill the shelves across the country,” she added.
CU, the nation’s leader in convenience store locations, has also joined the race to launch beauty products.
Partnering with local cosmetics brand Etude House, it released the CU-Etude Mini Care Series in November.
Comprising cleansing water and moisturizers, miniature products make it easy to carry around, the company said.
“It is not an exaggeration that ubiquity of convenience stores in Korea and its frequent point of contact with customers have made it possible to launch beauty products (at convenience stores), and such stores will become a new channel for teenagers to see, experience and purchase cosmetics, without having to go online,” said Choi You-jung, product marketer at BGF Retail, an operator of CU.
Earlier this month, BGF Retail teamed up with cosmetics manufacturers such as Kolmar Korea and investors like Kingsley Ventures and Ost Investment to develop and invest in health and beauty startups.
The selected startups will receive consulting with regard to commercialization, and distribute their products at CU stores across the country. Kolmar Korea will provide manufacturing techniques while the two investors will inject 100 million won-300 million won in seed money.
“While it has been relatively rare for convenience stores to invest in the cosmetics sector, the convenience stores will soon become one of the major channels to distribute beauty products and cosmetics accessories for customers at the most affordable price,” said an official from BGF Retail.
By Kim Da-sol/The Korea Herald (firstname.lastname@example.org)