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THE BACKGROUND

Ranked as the 11th largest cosmetics company in terms of sales worldwide, South Korea’s Amorepacific booked $4.8 billion in sales for 2016, all accumulated from 25 brands under its umbrella, including Sulwhasoo, Laneige, Innisfree, and Etude.

The company is known for its low to mid-range prices but high-quality products targeted towards the masses, especially young females.

By establishing Korea’s first cosmetics research lab in 1954, less than a decade after being founded in 1945, the company pioneered popular skincare trends such as boosting essences, sleeping masks, cushion foundations, and two-tone lip bars.

Forbes placed Amorepacific at No. 16 on its 2016 list of the world’s most innovative companies, and No. 7 in all of Asia.

Riding the ‘Hallyu Wave’ or South Korea’s pop culture phenomenon, the company has been largely credited to enhancing the Asian-ification multi-step beauty regime around the world.

Amorepacific Southeast Asia expansion
Amorepacific Southeast Asia expansion

The expansion of Korean Wave or “Hallyu” influenced the rise of Korean cosmetics brands. Source: Korean Joongang Daily.

THE CHALLENGE

The company reported a drop in its net profit by nearly 60% in Q2 2017 as geo-political tension between South Korea and China worsened due to the implementation of the THAAD anti-missile system earlier this year.

China was the company’s biggest overseas market, accounting for approximately 20% of total sales.

The tensions impacted a 22.5% drop in domestic sales and nearly 40%less Chinese tourists traveled to the country after travel agencies stopped selling packages to South Korea as insisted by the Chinese government.

With its two top markets performing poorly, Amorepacific had to look to other markets in order to grow and lessen its dependability on China.

THE STRATEGY

While the long-term focus was on typically homogenous markets in East Asia, the company’s ambition to tap into the global market was accompanied by a commitment to creating attractive products for new markets.

“Our growth strategy remains firmly focused on creating innovative, singular brands, and products that appeal to consumers in target markets, and we will continue to work towards becoming a great company delivering new beauty values to customers around the world,” said Amorepacific Chairman & CEO Suh Kyung Bae.

Amorepacific globalization plans seemed to start with Southeast Asia, as the company began dedicating more resources to efforts in the region.

Amorepacific Southeast Asia expansion

Amorepacific presence in Southeast Asia. Source: Pulse News.

 

“The market (ASEAN) is particularly important in that it is a gateway to India and the Middle East because ASEAN consists of multiple ethnic groups, including Indian, and is closely related to those markets,” said Na Jung Kyun, Head of Amorepacific ASEAN Regional Headquarters.

To penetrate the market, Amorepacific reformulated its products to compensate for the region’s humidity, darker skin tones, and the needs of Muslim women (“Muslimah”).

Examples include a lighter washable makeup that can be easily removed and applied for Muslimah that conducts daily prayers, which require a light washing of the face.

The company also developed darker shades of foundation for Laneige and Innisfree specifically sold in the region and aptly named “ASEAN Cushion Shades”.

In addition to localizing its product lines, the company also opened its first research and innovation lab earlier this year in Singapore. The aim is to develop highly tailored products for the ASEAN market and address regulatory issues.

Malaysia, in particular, has caught the cosmetic giant’s fancy as it invested 110 billion won ($95.7 million) to build its third overseas factory in the Nusajaya area – completion scheduled for 2020 – and opened an Etude flagship store in Kuala Lumpur early this month.

Amorepacific Southeast Asia expansion

Etude’s large range of lipstick in its flagship store.

“I believe among ASEAN member countries, the Malaysian market has the highest growth potential. In fact, it has been our goal to open a flagship store in Kuala Lumpur, and introduce the new core values of Etude House to a wider range of customers,” said Etude House CEO Geum Joo Kwon.

Not only has the company focused on traditional brick and mortar stores, Amorepacific has also taken its brands online with Innisfree launching an official brand.com web store, to offer its products worldwide.

Laneige has also opened an official store on popular Southeast Asian marketplace Lazada Indonesia and Thailand.

Often the other way around – first developed then developing markets – the company is eyeing North America for further expansion.

“Our company is operating in the Korean market, the Chinese market, and the ASEAN market. The US market will be our fourth pillar for our business, so we are very much committed to developing the US market,” revealed Amorepacific Chairman and CEO Suh Kyung Bae.

Through Innisfree, the company made its official introduction to the US market earlier this month with a grand opening of its first store in NYC, where it currently offers 900 different items from skincare, makeup, and home scents.

It also expanded to 14 different shades in its cushion foundation to serve a wider range of skin colors.

Amorepacific Southeast Asia expansion

THE FUTURE

The company’s decision to place a bet in Southeast Asia has reaped fruitful results as it overtook competitor brand Estee Lauder and doubled its market share in Asia Pacific to 6% in 2016.

Amorepacific Southeast Asia expansion

It has lagged behind L’Oreal and Shiseido, two companies with the strong digital presence in Southeast Asia.

But the experience and knowledge it picked up in this region are expected to be helpful for its venture into other new markets.

“If we can achieve success in Southeast Asia with this much diversity, it can also be a very good experience for us to enter different countries with great diversity as well,” commented Na Jung Kyun, Head of Amorepacific ASEAN Regional Headquarters.

Here’s what you should know:

1. Amazon is expanding to South Korea

It is reported that Amazon has hired dozens of full-time employees, including marketing, sales, technical support and service support related to online shopping business in Korea.

The company had also a discussion with one of Korean financial companies in relation to electronic payment settlement. It is presumed that Amazon’s Korean branch is preparing to engage ecommerce business in Korea.

A speculation about Amazon expansion in Korean market has been heard over the past four to five years.

With Amazon entering Southeast Asia from Singapore, Korea is now the only remaining market in Asia with India. Amazon is already showing a rapid growth in Japan and failed to land in China.

Read the full story here

2. Google’s Go Global initiative aims to train 2,500 SMEs 

Google announced the expansion of its Go Global initiative, launched in 2015, with a commitment to train 2,500 small and medium enterprises (SMEs) to be digitally and export-ready by 2019.

The scheme will now includes access to dedicated marketing consultants for advice on growing businesses through online media besides developing ecommerce capabilities.

Google’s new partnerships with the National Trades Union Congress (NTUC) and Singapore infocomm Technology Federation (SiTF) will also help to reach a larger pool of SMEs. Go Global’s offerings will now be available to NTUC’s and SiTF’s combined base of 13,650 member companies.

Read the full story here

3. Shiseido is launching Nars in China through online

Japanese company Shiseido will release its high-end cosmetics brand Nars in China to attract new customers as the country’s income levels rise.

Shiseido will begin online sales through WeShop, a popular Chinese ecommerce site, at the end of August and offer its selections of  foundation, lipstick, eyeliner. Shiseido predicts Chinese sales will improve 14% on a local currency basis.

Nars became a Shiseido subsidiary in 2000. The brand mainly sells in department stores throughout around 30 countries in the Americas, Europe, Japan and Southeast Asia. Nars is also sold in Hong Kong, but not in Mainland China.

Read the full story here

Indonesia’s young population is increasingly making more money year on year. Women especially have seen an increase in the employed rate from 46% of the working age of women population to 52% in a decade. What does this mean for businesses looking at this market? A growing opportunity for health, fashion cosmetics companies.

It’s no surprise then that Indonesia is named as the fastest-growing market for beauty in Asia in terms of compound annual growth rate according to the latest report by Euromonitor International, Markets of the Future: ASEAN in 2020. Domestic sales of beauty products in Indonesia totaled IDR 11 trillion or $818 million in 2015 based on data from the Ministry of Industry.

The country’s growth for Beauty and Personal Care (BPC) market has successfully outperformed its more mature sisters – China and South Korea  – as seen below. Indonesia’s Government Regulation No. 14 Year 2015 has also named the high performing sector as a primary mover of the future economy.

indonesian beauty sociolla

Indonesia is at the top of past growth of Beauty and Personal Care (BPC) markets in Asian markets. Source: Euromonitor

As the largest market in Southeast Asia with a GDP of $888.5 billion and a population of 250 million, analysts predict Indonesia could rise up to the top five markets for cosmetics in 10 – 15 years. While women continue to be the dominant shopper of cosmetics, the male market segment is steadily increasing and richer, younger generations are becoming regular consumers.

A player who has been in the game since 2015 is Sociolla, Indonesia’s first beauty retailer that offers brands such as Marc Jacobs, Laneige and Shiseido to go head to head with Sephora Digital. Chrisanti Indiana, one of the co-founders and CMO of Sociolla, shares the company’s story with ecommerceIQ.

Local versus international brands

International beauty brands and imported goods accounted for 60-70% of total 2015 domestic sales in Indonesia, roughly $441 million. Brands from the US experienced a 3% boost in total imports due to an increase in demand from Indonesians, particularly in Jakarta and tier-2 cities.

Popular Indonesian players like Mustika Ratu, Sari Ayu Martha Tilaar and Wardah are facing fierce competition with international household names such as longstanding L’Oreal, Unilever, and Sephora, Kiehl’s that have entered the market through specialty stores.

Reputation and name-recognition continue to be the drivers for cosmetics purchase in Indonesia.

indonesian beauty sociolla

Source: agnesoryza.com

Sociolla understands its Indonesian audience has low levels of brand-loyalty and more than 30% are willing to try a new product next purchase. This means the company consciously works with a variety of brands overseas and local brands, especially the up and coming ones like Polka and Rollover Reaction to attract more shoppers.

While personal care products from giant brands such as P&G are available even at the local mom and pop stores across the country, imported and niche cosmetics brands are limited to the big cities. The lack of an offline footprint outside big cities in Indonesia is causing people to turn online to find their favorite brands.

Channeling beauty online

WeAreSocial estimated 132.7 million Indonesians are now online and 48% of them use the internet to find products and/or services. A recent survey conducted by ecommerceIQ found that 57% of Indonesians shoppers start their product search on an e-marketplace like Lazada.

With so many Indonesians browsing online, it would make sense for brands to have a bigger presence on the web. However, there aren’t many options for personal care products online as shown in ECOMScape: Indonesia, the country’s ecommerce landscape by ecommerceIQ.

“The digital sector began to take off at the beginning of 2015 so knew we wanted to focus on a vertical. It wasn’t hard to choose beauty as I’m a beauty enthusiast and we didn’t see any strong players in the sector at the time,” says Chrisanti.

Going online was a no-brainer for the founders but convincing local and global beauty brands – many of them already established companies – was one of the biggest hurdles.

indonesian beauty sociolla

Educating brands like Menard and Bioderma to utilize the internet as a sales channel became the company’s standard operandi. To date, there are 197 brands registered on Sociolla’s platform and the team continues to work closely with each one to optimize product assortment and seasonal campaigns.

“I would say one of Sociolla’s largest achievements is unlocking the potential of these brands online and gaining their trust to work exclusively with us,” Chrisanti comments.

BLP Beauty is a local lipstick brand that sells exclusively online through an Instagram account and Sociolla platform. Through a series of marketing campaigns on Instagram, BLP was able to successfully sell more than 4,000 lipsticks in only two hours.  

indonesian beauty sociolla

Sociolla is also using content SEO to educate and attract people to visit the website using its ‘Beauty Journal’ blog. With more than 2,000 entries published on the blog since late 2014, Sociolla regularly writes about beauty tutorials, product reviews, and events.

The main site attracted more than 2.4 million visitors in March alone, leaving behind its closest competitor – Sephora Digital.

indonesia beauty Sociolla

Indonesia’s grey market

Brands were not the only ones they had to convince. Getting customers to shop on its platform was another hurdle they had to overcome.

“I think our fiercest competition is the grey market, especially popular sellers on Instagram because they can price items for very cheap while as an official partner, we adhere to brand guidelines to provide quality goods,” says Chrisanti.

In 2016, almost 70% of Indonesian internet users were using Instagram according to data from JakPat. It isn’t surprising that over 4 million posts show up in the search results for #kosmetik, the Indonesian word for cosmetics. Meanwhile, search results for #kosmetikmurah (cheap cosmetics) and #jualkosmetik (sell cosmetics) showed up with more than 3 million and 2 million posts, respectively.

indonesian beauty sociolla

Although prices may be cheaper, the biggest problem with these social sellers is the disappointing counterfeits and unlicensed products by the National Agency of Drugs and Food Control in Indonesia.

“Shopping online in the region has always been shrouded by trust issues. Through official partnerships with brands, we are assuring customers they can trust our products. Our relationship with the brands is our biggest advantage,” says Chrisanti.

BeautyLink is the company’s answer to a ‘regulated’ grey market. The marketplace is a space for certified third-party merchants to sell brands that aren’t being offered on Sociolla due to lack of local licenses, the number of minimum SKUs, etc. To ensure the authenticity and quality of the products, Sociolla does a careful check on all sellers during the initial agreement phase, monitors user feedback and regularly samples seller inventory.

Brands who want to manage their own online presence can also register on BeautyLink. The marketplace houses 480 brands, including The Body Shop, Jo Malone, and Clinique, which makes up over 8,000 SKUs.

Marketing channels beyond online

Aside from online marketing, the offline world plays a big part in its strategy. More than 50% of Sociolla buyers come from Java, followed by Sumatra (15%), and Sulawesi (5%).

To reach these markets, the company has hosted numerous activities such as Sociolla Soirée with the country’s top beauty bloggers/influencers, secret customer getaways, and organizing pop-up stores to try product samples.

indonesian beauty sociolla

Source: Behance

The company also participated in Femme Expo, the biggest Women Expo in East of Indonesia, by opening its own beauty section named ‘Sociolla Beauty Week’ and bringing portfolio brands from Jakarta to showcase products at the expo to 39,000 attendees.

A pretty bright future

The company recently raised an undisclosed Series B from Istyle, the Tokyo-based internet company with @Cosme, the largest cosmetics and beauty product community website in Japan, under its belt. In light of its second anniversary, Sociolla is using the money to improve Sociolla Box — a subscription model it launched last year as one of its marketing initiatives.

They currently have around 370 individuals registered for the service who will receive a monthly beauty package filled with 4-5 beauty products chosen by Sociolla. The ability for customers to customize the beauty box is in the works.

indonesian beauty sociolla

To further cement its standing as a beauty ecosystem and improve user experience, the founders have also built Sociovit, ecommerce for healthy lifestyle products such as vitamins, fitness supplements, wellness products, etc.

indonesian beauty sociolla

“Customer feedback is the company’s main inspiration for every new product we develop,” says Chrisanti.

The dedication to its users and emphasis on localization is propelling Sociolla well on its way to becoming the online beauty destination in Indonesia.

indonesian beauty sociolla

Sociolla founders. Left to right: Christopher Madiam, Chrisanti Indiana, and John Rasjid at Sociolla’s pop-store in Bandung

BY: RARA KINASIH