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Business trends

South Korean and Japanese brands paint the new face of beauty

Focus on skin care and mix of exotic ingredients capture hearts of millennials

Cosme Decorte, a premium brand from Japan's Kose, has grown popular in China thanks to exposure among tourists visiting Japan. (Photo by Motokazu Matsui)
Cosme Decorte, a premium brand from Japan's Kose, has grown popular in China thanks to word-of-mouth among tourists visiting Japan. (Photo by Motokazu Matsui)

TOKYO -- Snail slime, salmon eggs and white jelly mushroom extract are some of the popular ingredients in cosmetics these days, as millennials turn to South Korean and Japanese brands that propose innovative ways to enhance the skin.

The brands enjoy great demand, especially in the world's two main markets of China and the U.S., where companies like Kose, Shiseido and AmorePacific Group are challenging the long-established rule of Western rivals.

South Korea last year became China's top source of cosmetics imports by value for the first time, dethroning France, whose L'Oreal has long led the Chinese beauty products market. This year, K-beauty looks set to claim the No. 1 spot once more, with hot-on-its-heels Japan likely to take second place. China's cosmetics market grew 9.6% in 2017 to about $53.5 billion, including hair care products, having surpassed Japan in 2012 to rank second after the U.S.

Women in their teens and 20s filled a newly remodeled Shanghai store of AmorePacific's Etude House brand recently. Along with a lineup of around 1,000 goods like lip balm and eye shadow, starting at roughly 60 yuan ($9), the store features virtual reality devices that let customers try on products digitally, as well as a corner in which their names can be printed on items.

The store "always has some new surprise," said one 24-year-old customer, who sometimes spends as much as 1,000 yuan there in a day. "It makes the makeup itself fun."

Etude House releases as many as 50 new products monthly and gets heavy traffic from so-called influencers posting photos on social media for large followings. The brand has 68 Chinese stores, up 50% from 2016.

The brand "uses digital to capture young people seeking an individuality existing brands lack," said Zhan Wei, a sales manager.

Customers can try on cosmetics digitally at AmorePacific's Etude House in Shanghai. (Photo by Motokazu Matsui)

AmorePacific rode the popularity of South Korean TV dramas to expand its share of China's makeup market to 6% last year, up by roughly half since 2014. Other up-and-coming South Korean brands such as 3CE and Mediheal continue to advance in China as well.

In the U.S., K-beauty gained popularity through e-commerce sites run by young female entrepreneurs who not only sell products but educate customers on how to think about beauty.

"I spend about a third of the year with my team based in Korea to meet with brands and see what products, ingredients and applications are top of mind for Korean consumers," said Charlotte Cho, founder of e-commerce site Soko Glam and one of the first purveyors to introduce South Korean brands to the U.S. market in 2011.

"Snail mucin is not the oozy, gooey slime that you may think it is," Cho wrote in a product review on her website. She went on to list the ingredients, as well as supply a recent study on snail mucin. Cho wrote that she noticed "how soft, supple and moisturized my skin was" after three weeks of using the product.

Much of K-beauty's success stems from its emphasis on ingredient-focused skin care, which millennials have embraced, and the abundance of new products that are developed.

"There is a ritualistic element of Korean beauty that is all about self-care, and I think that really is very much a topic that people are very interested in right now," said Alicia Yoon, founder of U.S. e-commerce site Peach & Lily. The Harvard Business School graduate left a consulting job in 2012 to create her company.

Beyond the website, Peach & Lily has distributed in partnership with stores such as Urban Outfitters, Sephora and Target. The company brought Korean beauty into the mainstream last year by partnering with pharmacy giant CVS, launching products into more than 2,100 outlets across the U.S.

Yet K-beauty faces its own challenge from Japanese cosmetics, or J-beauty, with import values from the country to China doubling in the January-June half from the year-earlier period.

"There is a ritualistic element of Korean beauty that is all about self-care"

Alicia Yoon

A department store in a Shanghai shopping district enjoys strong sales for skin care products from Kose's premium Cosme Decorte brand, priced around $90 or more each. The company's less-expensive Sekkisei line has been hugely popular with Chinese consumers who shop heavily in Japan.

"Japanese products, which are highly effective at moisturizing and in other areas, are being well received for their high quality," said Masahiro Horita, the general manager for Kose's Chinese arm. The company aims to have 30 Cosme Decorte stores in China by 2020, up from 13 now.

One 30-year-old Shanghai denizen grew attached to Kose goods in the past year or two, after her husband began bringing them back as presents from frequent business trips to Japan. She now buys them at local department stores, saying they "match my skin better than Western ones."

Shiseido expanded domestic production to capture rising demand for made-in-Japan goods, especially among Chinese consumers. The company has begun opening directly run stores dedicated to its Elixir skin care brand, production of which was shifted to Japan last year from Vietnam. By 2020, Shiseido plans to have spaces for trying out products at all of its roughly 270 Chinese shops.

Shiseido operates this Elixir store in Shanghai. The company moved production for the brand from Vietnam to Japan.

Pola, the flagship brand of Pola Orbis Holdings and maker of a hit anti-wrinkle product, plans to triple its China shop count to 34 by 2020.

J-beauty receives praise in the U.S. from experts and increasingly picky consumers for its emphasis on "slow beauty" and avoidance of gimmicks. Japanese brand ReFa is making waves across the U.S. with its ReFa S Carat -- a facial skin care device meant for an "in-office cosmetic procedure" that lifts sagging skin, aids the lymphatic system and reduces puffiness, all by rolling it across one's face. The product, priced at $320, is boosted by a slight microcurrent generated by drawing sunlight into a built-in solar panel at its handle.

Japanese and South Korean companies focus more on skin care compared with Western rivals, whose fortes are perfume and makeup. They also put effort into researching products suited to Asian customers' skin.

L'Oreal seized roughly 30% of the Chinese market with heavy advertising and low-cost local production, but its publicity efforts began to wear off around 2014 as younger generations shifted toward smartphones and away from the French company's typical channels.

In an effort to catch up, L'Oreal said in May it would buy the South Korean company behind 3CE. L'Oreal's head of Asian operations, Frank Meyer, said buying Japanese and South Korean brands would be critical to its China strategy.

Camilla Siazon in New York contributed to this report.

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