‘Not healthy for the industry’: Sephora’s withdrawal from Korea leaves market less diverse than ever

By Amanda Lim

- Last updated on GMT

Sephora’s exit from South Korea leaves a vacuum highlighting need for a diversity of brands and retail channels in the market. [Getty Images]
Sephora’s exit from South Korea leaves a vacuum highlighting need for a diversity of brands and retail channels in the market. [Getty Images]
Sephora’s exit from South Korea leaves a vacuum highlighting need for a diversity of brands and retail channels in the market, says experts.

In addition to a lack of localisation, Sephora’s exit from Korea was attributed to the strength of the local competition​ – namely retailers Olive Young and Chicor, owned by CJ Group and Shinsegae International respectively.

Odile Monod, K-beauty market guru lamented the absence of another player in the market.

Especially since single-brand offline shops started closing down one after another, it’s really a dichotomy and it’s a very clear one at the moment. I really wish that there was more diversity in terms of channels in Korea. Olive Young, for instance, only carries a small selection of beauty brands both Korean and foreign.”

Monod added that it was common in Korea for brands and retailers to secure exclusive partnerships.

“Sometimes with a partnership, retailers agree to carry a brand as long as they don’t carry a competitor brand. This makes it impossible for competitor brands to enter,” ​she explained.

Monod echoed the views of Lauren Lee, founder of STYLESTORY, a K-beauty distributor and consultancy, who told CosmeticsDesign-Asia ​that this left consumers with “less choice and a reduced bargaining power,”​ said Lee.

“Sephora was a popular alternative for those looking for a more diverse collection because it stocked a greater shade range of foundations and colour cosmetics than those offered domestically, as well as better access to popular foreign brands,”​ said Lee.

A damaging monopoly?

Monod emphasised the dominance of Olive Young in Korea and noted that it could ultimately be damaging for the industry.

“Olive Young has been carrying out these aggressive omnichannel shopping experiences, making it very hard for other drugstore retailers to compete when there’s an Olive Young every couple of metres. I think Olive Young really has a monopoly right now in Korea and that’s not healthy for the industry,” ​she said.

She elaborated that this meant less room for brands, especially foreign brands, as Olive Young has always been a champion for Korean beauty small and medium-sized (SME) companies.

The firm has been key to the international success of a number of K-beauty brands such as Rom&nd and VT Cosmetics.

Earlier this year, Olive Young collaborated with the Industrial Bank of Korea (IBK) to establish a KRW100bn (USD74.3m) fund to support the growth of local beauty SMEs.

"As a domestic beauty platform, Olive Young aims to play a pivotal role in leading the global prosperity of the K-beauty industry by spreading successful models that thrive in overseas markets, supporting the establishment of cosmetics as a representative export item for South Korea. From discovering and nurturing new brands to supporting their growth and international expansion, we will take on the role of a catalyst for the global heyday of the K-beauty industry.”said Lee Sun-jung, CEO of CJ Olive Young.

The presence of Sephora in Korea could have potentially opened up more opportunities for smaller foreign beauty brands to enter the market.

Sephora has been key to the international expansion of many smaller brands, including Ouai​, Frank Body​, and Ultra Violette​.

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