South Korea - Country Commercial Guide
Cosmetics

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2020-09-20

ITA CODE: COS

Overview

 

2015

2016

2017

2018

Total Market Size

7,640

8,129

8,799

9,370

Total Local Production

9,481

11,241

11,950

13,966

Total Exports

2,929

4,192

4,372

6,223

Total Imports

1,088

1,080

1,176

1,627

Imports from the U.S.

448

398

378

380

Exchange Rate:            W1,132 (2015); W1,161 (2016); W1,131 (2017); W1,110 (2018); 
Sources:              Korea Cosmetic Association (KCA)
Unit:                              $ million
Total market size:         Total local production – total exports + total imports

South Korea is the 9th largest cosmetics market in the world, representing nearly 2.8 percent of the global market. In 2018, the market was estimated to be $9.3 billion; total local production and total exports increased approximately 14.7 percent and 26.5 percent respectively from the previous year. The market has grown annually by 5.4 percent for the last 5 years (2014-2018).

Meanwhile, total imports of cosmetics in 2018 rose 5.4 percent from 2017 and was valued at $1.6 billion. U.S. imports accounted for 23.3 percent of total imports. On a country by country basis, France ($453 million) was the largest exporter to Korea in 2018, followed by the U.S. ($380 million) and Japan ($257 million).

According to the Korea Customs Service statistics, skincare cosmetics continued to be the largest import category representing 47.8 percent, or $755 million of total cosmetic imports in 2019.  Haircare products (14.3 percent), makeup cosmetics (13.8 percent), and perfumes and scents (11.3 percent) accounted for the next largest import categories.   

Distribution Channels

There has been a growing demand for new retail channels as consumer demand is becoming increasingly more segmented. The market has reacted, making select shops and multi shops more prevalent. In line with this trend, the three major health & beauty stores (Olive Young, Lalavla, and LOHB’s) grew for three consecutive years with 1,356 stores in 2017, 1,490 in 2018, and 1,512 in 2019. In addition, Sephora, the world’s biggest cosmetics retailer owned by LVMH Group, opened its first store in Korea in October 2019, featuring a total of 99 brands ranging from affordable to luxury. By 2020, Sephora plans to open 14 more stores. The addition of these stores is expected to intensify the competition in the market with major H&B stores and select shops such as Chicor and Boots.

South Korea stands out as the country with the highest smartphone ownership rate/broadband penetration rate and fastest average internet speed. It is not surprising that South Korea’s e-commerce channels are becoming increasingly popular for cosmetic products consumers. Sales via mobile shopping have increased dramatically in recent years. According to the Korean National Statistical Office, cosmetics online shopping transactions grew 25 percent year-on-year to $10.5 billion in 2019. Of these, mobile cosmetics transactions amounted to $6.3 billion, up 32.6 percent from the previous year, accounting for 59.4 percent of total cosmetics online shopping. The domestic cosmetics industry is actively using social network services (SNS) as a key tool in the business, from the development stage of the product to sales and customer inflow. 

Best Prospects/Services  

  • Cosmeceutical cosmetics
  • Multi-functional products
  • Organic Cosmetics

Opportunities and Challenges

Strong potential subsectors for U.S. exporters to South Korea include cosmeceuticals and derma-cosmetics. Cosmeceutical is a cosmetic that has or claims to have medicinal properties, for example a product with anti-aging property may be classified as a cosmeceutical. Korea’s domestic cosmeceutical market, about $430 million in 2014, experienced 15 percent annual growth since then to reach $1 billion in 2019. Currently, the hottest trends are products that claim anti-pollution, anti-aging, and antioxidant related technologies.  When it comes to ingredients, natural/organic/stem cells/probiotics, and peptides ingredients are the focus of attention these days.

Two South Korean companies, Amore Pacific and LG Household and Healthcare, dominate local production market. In addition, Korean consumers are purchasing more products directly from overseas markets. Customers can now buy foreign brands at the same prices as in the U.S., and an increasing number of brands are offering overseas shipping services. Overseas direct purchases represented more than $3 billion in 2019, up 22.3 percent from the previous year. Clothes/fashion (38.7%), food and beverages (25.1%), electronic products (12.7%), and cosmetics (5.3%) are very popular among overseas online Korean buyers. 

New Trends 

In March 2020 the South Korean government introduced the world’s first customized cosmetics system, which mixes cosmetics at stores according to individual skin condition and preference. For example, a local cosmetics flagship store now offers a tailored 3D mask. The skincare product utilizes a smartphone app, which measures customer’s facial dimensions, generates a skin diagnosis, and sends the information to a special 3D printer, which then prints a hydrogel facial mask that is tailored to the user’s face shape and skin conditions.

Regulatory Environment

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 previously comprised whitening, anti-wrinkle, and sunscreen and tanning products, were extended in 2017 to 10 categories by the MFDS. The new categories include hair colorants, hair nutrients, and cosmetics that help protect damaged skin. MFDS only reviews 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. 

Also South Korea implemented the Recycling Act in December 2019, which is applicable and impacts all products available in South Korea including cosmetics. Under the Recycling Act, the usage of plastic materials that are difficult to recycle such as PVC and colored PET bottles has been banned.

Under the implementation of U.S.–Korea Free Trade Agreement (KORUS FTA) in March 2012, tariffs on imported cosmetics were reduced. All remaining Korean tariffs on imported U.S. cosmetics will be eliminated by January 1, 2021. 

Resources

Trade Shows

COSMOBEAUTY SEOUL 2021 (May 5-7, 2021)
http://www.cosmobeautyseoul.com/fairDash.do?hl=ENG
COSMOBEAUTY SEOUL has been growing as Korea’s most renowned beauty exhibition by providing latest beauty trends in Korea. COSMOBEAUTY SEOUL 2018 drew 342 exhibitors from 14 countries and in excess of 50,000 visitors including manufacturers, distributors, wholesalers, agents, retailers, press, and general public. 

Key Contacts

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

Local Contact

Ms. Heesook Baik
Commercial Specialist   
U.S. Embassy Seoul
188 Sejong-daero, Jong
no-gu
Seoul 03141, Korea
Tel: 82-2-397-4172
heesook.baik@trade.gov
https://www.trade.gov/southkorea