Korean SMEs leading K-beauty industry growth

I recently switched to a different sunscreen after finishing my old one, and I once again felt the competitiveness of K-beauty. I’ve been rotating between sunscreens made by local indie brands for several years. I considered buying a new sunscreen this time, but I remembered a French brand sunscreen I received as a gift at the end of the year. However, after trying it just a couple of times, I stopped using it. During makeup application, the sunscreen left visible white residues, causing much nuisance during busy morning makeup routine. Now, I am back to my usual domestic brand without stress from white powdery residues.

Many U.S. consumers have noticed the merits of robust yet affordable K-beauty products. Korean cosmetics topped the market share of foreign cosmetics imported in the U.S. for the first time, selling some 1.405 billion U.S. dollars in the States alone between January and October 2024. Statistics from November and December are yet to come. However, the gap between Korea and second-ranked France is almost 400 million U.S. dollars, making it hard to overturn the ranking. Korea has been on the list of cosmetics importers in the Japanese cosmetics market, outpacing France for three consecutive years since 2022.

What's more encouraging is that the K-beauty growth is not being led by a few selected large companies but by Korea's small-to-medium-sized enterprises (SMEs). The recent boom in K-beauty is driven mainly by SME and indie brands. According to the Ministry of SMEs and Startups, about 70% of Korea’s total cosmetics export value between January and September last year came from SME and indie brands, including Skin1004, Beauty of Joseon, TirTir, Skin Wizard Manyo, and Anua.

World-class Original Development Manufacturing (ODM) companies such as Kolmar Korea and Cosmax have also contributed to K-beauty growth in terms of technology and production. Many small independent cosmetics brands without their own production facilities mostly rely on ODM companies for production. Independent brands are equivalent to "Fabless" semiconductor design companies in the semiconductor industry and ODM companies as "Foundry" contractor manufacturers. Against this backdrop, SMEs could channel their energy into planning, marketing, and PR activities without worrying about product quality. Currently, Korea is considered to have set up the best ecosystem for the cosmetics industry in the world, from product planning and production to marketing and PR activities.

Korea's beauty SMEs have displayed excellent marketing skills and strategies and prompt responses to customer needs under this well-established ecosystem. One senior executive working at a Korean indie brand noted that the company is accepting as many suggestions for improvement as possible to address both local and international consumers' needs in real time and that it was able to promptly respond to evolving global trends by boldly delegating its roles to and empowering local branches and their local employees.

Since exceeding one billion dollars in exports for the first time in 2012, Korea's cosmetics export volume reached a record high of 10.2 billion dollars, scoring 10 billion dollars in just 12 years. Korea is now regarded as a peer cosmetics competitor globally with France and the U.S. This year looks promising for the industry, and the K-beauty boom is expanding to the Middle East, Africa, and Europe, moving beyond usual importing nations such as the U.S., Japan, and China. It is hoped that the Korean economy will also leap forward this year, much like K-beauty.