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Import beauty brands, whose high prices were long equated with high quality and a premium image here, are under growing pressure recently to change their pricing policy.
Adding to their concerns about the stunning growth of no-frills brands in the market, the government plans to ease regulations on “parallel imports” to spur price competition among players.
Unlike the official importers, parallel importers do not need to pay a royalty fee, which leads to lower product prices. Consumers instead are led to settle for poor after-sales service.
But due to the nation’s tricky clearance procedures and premium marketing by official importers, parallel imports have been ignored by consumers, while beauty companies have maintained higher prices in Korea than in other markets.
According to the Korea Food and Drug Administration, there was as much as a 6.5-fold discrepancy between import and sales prices of foreign brand cosmetics and skin care products last year.
For instance, SK-II, which brought in the most imports among foreign beauty brands in 2013, sold its top-selling Treatment Essence for 199,000 won ($185), about four times higher than its original import price of 51,000 won.
“When eased regulations are implemented from March as planned, prices of import products may lower, by almost half,” said an official from the Ministry of Strategy and Finance. “We will also toughen quality control at the same time.”
The government decision comes at a time when foreign beauty brands have struggled from sluggish sales in recent years.
Their combined sales at department stores ― the most preferred venue for beauty shopping here ―are estimated to have fallen almost 10 percent last year to 1.9 trillion won, according to industry data.
Of the top 20 import brands, only Chanel saw its sales rise from the previous year, according to industry data. Most brands like SK-II, Estee Lauder and Lancome are believed to have seen an almost 20 percent decrease in sales.
“The biggest threat comes from low-priced brands,” said a PR executive from a foreign cosmetics brand. “We cannot compete with them on cheaper items such as lipsticks. That’s why companies are making all-out efforts to sell pricier essence products.”
Industry sources, however, predicted no immediate change in the pricing policy of import brands following the government’s regulatory easing. “We need to watch the market reaction. Korean consumers are still attracted to customer service at department stores.”
By Lee Ji-yoon (jylee@heraldcorp.com)
Adding to their concerns about the stunning growth of no-frills brands in the market, the government plans to ease regulations on “parallel imports” to spur price competition among players.
Unlike the official importers, parallel importers do not need to pay a royalty fee, which leads to lower product prices. Consumers instead are led to settle for poor after-sales service.
But due to the nation’s tricky clearance procedures and premium marketing by official importers, parallel imports have been ignored by consumers, while beauty companies have maintained higher prices in Korea than in other markets.
According to the Korea Food and Drug Administration, there was as much as a 6.5-fold discrepancy between import and sales prices of foreign brand cosmetics and skin care products last year.
For instance, SK-II, which brought in the most imports among foreign beauty brands in 2013, sold its top-selling Treatment Essence for 199,000 won ($185), about four times higher than its original import price of 51,000 won.
“When eased regulations are implemented from March as planned, prices of import products may lower, by almost half,” said an official from the Ministry of Strategy and Finance. “We will also toughen quality control at the same time.”
The government decision comes at a time when foreign beauty brands have struggled from sluggish sales in recent years.
Their combined sales at department stores ― the most preferred venue for beauty shopping here ―are estimated to have fallen almost 10 percent last year to 1.9 trillion won, according to industry data.
Of the top 20 import brands, only Chanel saw its sales rise from the previous year, according to industry data. Most brands like SK-II, Estee Lauder and Lancome are believed to have seen an almost 20 percent decrease in sales.
“The biggest threat comes from low-priced brands,” said a PR executive from a foreign cosmetics brand. “We cannot compete with them on cheaper items such as lipsticks. That’s why companies are making all-out efforts to sell pricier essence products.”
Industry sources, however, predicted no immediate change in the pricing policy of import brands following the government’s regulatory easing. “We need to watch the market reaction. Korean consumers are still attracted to customer service at department stores.”
By Lee Ji-yoon (jylee@heraldcorp.com)
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Articles by Korea Herald
